Evaluating Acadia Healthcare's (ACHC) Future View: Hold or Fold?
Acadia Healthcare Company, Inc. ACHC is strategically positioned for growth as it experiences an uptick in admissions and increasing demand for behavioral health and substance use treatment services. The company is proactively enhancing its capabilities to meet the rising demand in these critical areas.
Acadia Healthcare, with a market capitalization of $6.6 billion, operates as a prominent behavioral healthcare services provider in the United States and Puerto Rico. Due to solid prospects, this presently Zacks Rank #3 (Hold) stock is worth retaining at the moment. In this analysis, we'll explore the growth drivers and highlight the key factors investors should monitor.
Let’s delve deeper.
The Zacks Consensus Estimate for ACHC’s 2023 earnings is pegged at $3.41 per share, indicating 13.3% year-over-year growth. The company witnessed two upward estimate revisions over the past month against no movement in the opposite direction. Acadia Healthcare beat on earnings in three of the last four quarters and missed once, with an average surprise of 3.6%. This is depicted in the figure below.
Acadia Healthcare Company, Inc. Price and EPS Surprise
Acadia Healthcare Company, Inc. price-eps-surprise | Acadia Healthcare Company, Inc. Quote
The consensus mark for 2023 revenues stands at $2.9 billion, suggesting 11.7% growth from a year ago. Headquartered in Franklin, TN, Acadia Healthcare’s top line is poised to capitalize on increasing patient days and bed capacity. Our model predicts more than 7% year-over-year growth in U.S. same facility patient days in 2023.
The company is set to expand its facilities by adding 300 beds this year and opening at least six Comprehensive Treatment Centers. Additionally, the growth in the senior population is expected to contribute positively to ACHC, aligning with the rising demand for hospital services.
Its performance is likely to receive further support from growth in acute inpatient psychiatric facilities and overall revenue per patient day, which we expect to jump 6.5% year over year in 2023. The company expects adjusted EBITDA, excluding income from the PRF, between $665 million and $675 million in 2023, the midpoint of which suggests 12.9% growth from the year-ago figure.
The hospital company expects operating cash flows in the range of $450-$500 million this year, up from the year-ago level of $380.6 million. Capital expenditures for expansions are estimated between $300 million and $350 million, down from the earlier view of $350-$400 million. This can support free cash flow growth in 2023.
Key Concerns
There are a few factors that investors should keep an eye on.
Acadia Healthcare faces challenges with escalating expenses, as evidenced by a 7% increase in 2021 and a 9.7% rise in 2022. Our projections for 2023 highlight concerns, with estimates indicating more than 11% and nearly 14% year-over-year growth in salaries, wages & benefits and professional fees, respectively.
Furthermore, the company's return on equity of 10.7% falls short when compared to the considerably higher industry average. However, we believe that a systematic and strategic plan of action will drive growth in the long term.
Better-Ranked Medical Stocks
Enhancing the array of healthcare options, promising stocks in the Medical sector include Enovis Corporation ENOV, Centene Corporation CNC and Motus GI Holdings, Inc. MOTS, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Enovis’ current-year earnings implies a 4.9% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $1.7 billion. ENOV beat earnings estimates in all the last four quarters, with an average surprise of 11%.
The Zacks Consensus Estimate for Centene’s 2023 earnings indicates a 15.2% year-over-year increase to $6.66 per share. It has witnessed two upward estimate revisions over the past 30 days against no movement in the opposite direction. The consensus mark for CNC’s 2023 revenues calls for 4.4% growth from a year ago.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS has witnessed one upward estimate revision over the past 30 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
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