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Why Is Community Health Systems (CYH) Up 14.6% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Community Health Systems (CYH). Shares have added about 14.6% 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 Q2 Loss Widens, Revenues Fall Y/Y

Community Health Systems incurred adjusted loss of 47 cents per share in second-quarter 2019, narrower than the Zacks Consensus Estimate of a loss of 52 cents. However, the bottom line worsened from the year-ago quarter’s loss of 1 cent per share. This downside was mainly due to lower admissions in the quarter under review.

Quarterly Operational Update

In the second quarter, net operating revenues were $3.3 billion, surpassing the Zacks Consensus Estimate by 3.1%. However, the top line declined 7.3% year over year due to reduced admissions.

The second quarter witnessed an 11.5% decrease in total admissions and a 12.3% fall in adjusted admissions from the year-ago figures.

Total operating costs and expenses were $3.2 billion, down 9.5% year over year owing to lower salaries and benefits plus supplies, depreciation and amortization.

Financial Update

Total assets at second-quarter end were $16.1 billion, up 1.7% from the level at 2018 end.

Cash and cash equivalents were up 5.6% from the tally as of 2018 end.

Net cash used by operating activities soared nearly 182% year over year for the six months ended Jun 30, 2019.

The company has a long-term debt of $13.4 billion as of Jun 30, 2019, in line with the number as of Dec 31, 2018.

Company Divestitures

In the first half of 2019, the company closed the divestments of seven hospitals. Also, it entered into agreements to sell off three other hospitals, which are pending.

2019 Guidance

Loss per share from continuing operations is now estimated between $1.65 and $2 while revenues are projected between $12.9 billion and $13.2 billion. Adjusted EBITDA is predicted in the range of $1.625-$1.725 billion while adjusted admission is likely to inch up 0.5-1.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Community Health Systems has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. 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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