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Community Health Systems (CYH) Up 34.9% Since Last Earnings Report: Can It Continue?

In the latest trading session, Arbor Realty Trust (ABR) closed at $12.28, marking a -0.57% move from the previous day.

A month has gone by since the last earnings report for Community Health Systems (CYH). Shares have added about 34.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Community Health Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Community Health’s Q3 Earnings Miss, Down Y/Y

Community Health incurred adjusted loss of $1.64 per share in the third quarter of 2018, wider than the Zacks Consensus Estimate of a loss of $1 and the year-ago loss of 79 cents. The bottom line further deteriorated 108% year over year. This downside was mainly due to lower admissions in the reported quarter.

Quarterly Operational Update

In the quarter under review, net operating revenues were $3.4 billion, surpassing the Zacks Consensus Estimate by 2.6%. However, the top line declined 5.9% year over year.

The third quarter witnessed a decrease of 12.4% in total admissions and a 12.2% fall in adjusted admissions when compared with the year-ago period.

Total operating costs and expenses were $3.3 billion, down 5.6% year over year, induced by lower salaries plus benefits and supplies.

Financial Update

Total assets at quarter end were $16.4 billion, down 6% from year-end 2017 level.

Cash and cash equivalents plunged 40.5% to $335 million from year-end 2017.

Cash flow from operations was $440 million for the quarter under discussion, having dropped 28.7% year over year.

The company has a long-term debt of $13.5 billion as of Sep 30, 2018, dipping 2.5% from 2017-end level.

2018 Guidance

Loss from continuing operations per share is now expected between $2.25 and $2.10, wider than the earlier expectation of $1.85-$1.70.

Community Health nudged down the low-end of its net operating revenues guidance to a range of $12.0-$14.2 billion, from the previous range of $13.9-$14.2 billion.

The company reiterates its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) projection in the range of $1.60-$1.65 billion for 2018.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 14.01% due to these changes.

VGM Scores

At this time, Community Health Systems has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Community Health Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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