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What's in Store for Genesis Healthcare (GEN) This Season?

Zacks Equity Research

Genesis Healthcare, Inc. GEN is scheduled to report second-quarter 2019 results on Aug 8.

The Zacks Consensus Estimate is pegged at a loss of 13 cents, which indicates 23.53% improvement from the year-ago reported figure. The consensus mark for revenues stands at $1.15 billion, implying a decline of 9.77% from the year-ago quarter’s reported figure.

Factors to Affect Q2 Results

We expect strong same-store EBITDAR growth driven by a more stable census and reimbursement environment, effective cost management, improvement in the company’s therapy and staffing businesses, and the impact of continued streamlining of its portfolio.

The company’s revenue growth will to some extent be offset by loss of revenues from divestitures, lower revenues in its rehab services business segments following the cancellation of low-margin therapy contracts.

The company’s expenses are likely to reduce due to decline in lease rental payments related to divestitures and closures. From 2018 through the first half of 2019, it made 65 divestitures. In the second quarter as well, it sold off 10 of its facilities.

As a result of improving operating trends and business portfolio optimization strategy, the company witnessed an increase in same-store occupancy levels in the first quarter and expects the same in the to-be-reported quarter.

We expect the company to deleverage its balance sheet with the funds received from numerous business sales made recently.  

The company’s EBIDTA margins should also improve due to its focus on streamlining operations. In the last quarter, these reported margins were at their highest in two years, and the same should continue to improve in the coming quarters.

Earnings Surprise History

The company surpassed earnings estimates in three of the four reported quarters but the average remains a negative earnings surprise of 19.30%. This is depicted in the chart below:

Genesis Healthcare, Inc. Price and EPS Surprise

 

Genesis Healthcare, Inc. Price and EPS Surprise

Genesis Healthcare, Inc. price-eps-surprise | Genesis Healthcare, Inc. Quote

What Our Model Says

Our proven model does not conclusively show that Genesis Healthcare is likely to beat earnings estimates this season because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to do so. But that is not the case here.

Earnings ESP: Genesis Healthcare has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our  Earnings ESP Filter

Zacks Rank: Genesis Healthcare carries a Zacks Rank #3, which combined with Earnings ESP of 0.00% leaves our surprise prediction inconclusive.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

CACI International, Inc. CACI has an Earnings ESP of +4.02% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here

TOL Brothers, Inc. TOL has an Earnings ESP of +8.77% and a Zacks Rank #3.

Canopy Growth Corporation CGC has an Earnings ESP of +24.56% and a Zacks Rank #3.

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