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HealthSouth climbs on 4Q results and 2013 outlook

NEW YORK (AP) -- Shares of HealthSouth Corp. jumped Tuesday after the hospital operator posted strong fourth-quarter results.

THE SPARK: HealthSouth reported its quarterly results Monday, while the market was closed for President's Day. The company said its net income declined, but it saw more patients and received more revenue per patient. HealthSouth said price adjustments by health insurers and Medicare helped its results. It also saw a larger percentage of Medicare patients than it had a year ago, and patients in the most recent quarter had more acute health problems.

The company said its net income slipped 5 percent, to $41.2 million, or 44 cents per share. Revenue grew 7 percent to $552.9 million. Analysts were expecting net income of 32 cents per share and $546 million in revenue, according to FactSet.

HealthSouth said discharges of patients at hospitals open at least a year grew 3 percent. That's an important measurement of hospital performance because it excludes results from facilities that opened or closed within the last year.

THE BIG PICTURE: HealthSouth says it is the largest owner and operator of inpatient rehabilitation facilities in the U.S. The Birmingham, Ala., company runs about 100 inpatient rehabilitation hospitals and more than 20 outpatient facilities in 27 states and Puerto Rico.

HealthSouth said it expects to earn between $1.50 and $1.56 per share in 2103 and said its revenue will be between $2.27 billion and $2.3 billion. The company said the upcoming federal budget sequester would reduce its annual earnings before interest, taxes, depreciation and amortization by about $25 million.

Analysts were forecasting net income of $1.66 per share and $2.24 billion in revenue, on average.

The sequester is a series of $85 billion in automatic budget cuts that is scheduled to go into effect March 1 if federal legislators can't agree on compromise legislation.

HealthSouth said its net income fell 12 percent to $160.3 million, or $1.69 per share, in 2012, and its revenue grew 7 percent to $2.16 billion.

HealthSouth also increased stock repurchase authorization to $350 million from $125 million. Stock repurchases increase companies' profit on a per-share basis because they reduce the number of shares on the market. They can also show that a company's management believes its stock is undervalued.

THE ANALYSIS: Raymond James analyst John Ransom said the results were better than the company suggested they would be in its January guidance. Ransom said HealthSouth did a good job of keeping its costs down and said its growth in 2013 looks good if the effects of the sequester and one-time items are excluded.

"HealthSouth continues to represent an outlier within the services landscape," he wrote.

Ransom rates HealthSouth stock at "Strong Buy."

SHARE ACTION: Shares of HealthSouth rose $2.03, or 9 percent, to $24.50 in afternoon trading. The stock has traded between $18.44 and $24.99 in the last year.