Kindred turns 3Q profit, but outlook sinks shares

Kindred posts 3Q profit and revenue ahead of Wall Street estimates, but outlook hits shares

• On 8:25 pm EST, Monday November 2, 2009

LOUISVILLE, Ky. (AP) -- Health care services company Kindred Healthcare Inc. said Monday it turned a better-than-expected profit in the third quarter, compared with a year-ago period in which it lost money after closing a hospital.

Kindred also raised its 2009 profit forecast, but expressed concern about the effects that lower Medicare and Medicaid reimbursement rates could have on its nursing center business next year, sending shares tumbling in after-hours trading.

Kindred said it earned $5.5 million, or 14 cents per share, compared with a loss of $21.3 million, or 54 cents per share a year ago. The most recent quarter included a tax gain of 4 cents per share. One year ago, Kindred booked a $22.1 million charge after closing a hospital, and said its results were hurt by shorter stays by patients, higher costs, and hurricanes in the Gulf region. Excluding one-time items, Kindred said it earned 5 cents per share in the 2008 period.

Revenue picked up 6 percent to $1.06 billion from $997.1 million, with growth seen across all divisions. The company said results were helped by growth in non-government admissions and favorable commercial pricing.

The figures easily topped estimates of analysts surveyed by Thomson Reuters, who expected a profit of just 3 cents per share and revenue of $1.05 billion.

For the fourth quarter, the company forecast a profit of 30 cents to 35 cents per share, compared with analysts' average 35-cent estimate. The company also lifted its 2009 profit outlook to a range of $1.48 to $1.53 per share, from $1.35 to $1.45 per share previously, and backed its projections for about $4.3 billion in revenue.

On average, analysts expect full-year earnings of $1.41 per share and $4.28 billion in revenue, according to Thomson Reuters.

However, Kindred said it expects revenue to take a hit next year because of lower rates being paid to long term acute care hospitals and nursing centers. It said it doesn't believe it can fully counteract the lower reimbursement rates, but is evaluating several strategies to help offset that decrease.

For 2010, the company projected a smaller profit of $1.20 to $1.35 per share, and $4.5 billion in revenue. Analysts, on average, were expecting higher earnings of $1.36 per share and $4.42 billion in revenue.

Its shares lost $1.55, or 10 percent, to $13.79 in aftermarket trading, having closed earlier up 4.4 percent to $15.34 before the results were released.

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