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Community Health Systems (CYH) Down 9.4% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Community Health Systems (CYH). Shares have lost about 9.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Community Health Systems due for a breakout? 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 catalysts.

Community Health’s Q2 Earnings Beat, Hikes '21 EPS View

Community Health reported second-quarter 2021 adjusted net income of 23 cents per share, which compares favorably with the Zacks Consensus Estimate of a breakeven. The bottom line declined to nearly four-fold on a year-over-year basis.

The company’s results gained momentum on the back of improved revenues and uptick in patient volumes. It benefited from the robust bounce back of non-COVID-19 patient volume as lesser number of COVID-19 cases were reported in the quarter under review. However, the quarterly result was partly offset by escalating operating costs.

Quarterly Operational Update

Net operating revenues of $3 billion climbed 19.4% year over year in the quarter under review attributable to increased admissions. The top line surpassed the consensus mark by 1.1%.

In the second quarter, admissions and adjusted admissions rose 4.8% and 15.7%, respectively, from the prior-year quarter.

As of Jun 30, 2021, number of licensed beds totaled 13,320, which dropped 14.4% year over year.

The company’s adjusted EBITDA of $453 million almost came in line with the prior-year quarter’s figure.

Total operating costs and expenses of $2.7 billion climbed 21.1% year over year mainly due to rise in supplies.

In the quarter under review, interest expense, net fell 15.8% year over year to $219 million.

Financial Update

Community Health exited the second quarter with cash and cash equivalents of $1.3 billion, which slumped 25.4% from the level at 2020 end.

Total assets as of Jun 30, 2021, were $15.5 billion, reflecting 3% fall from 2020-end level.

As of Jun 30, 2021, the company’s long-term debt totaled $11.9 billion, which declined 1.4% from 2020-end level.

For the six months ended Jun 30, 2021, net cash provided by operating activities of $280 million plunged to more than six-fold from the year-ago comparable period.

2021 Outlook Revised

This year, the company’s net operating revenues are now projected in the range of $11.9 billion to $12.3 billion compared with the prior guidance of $11.7-$12.5 billion.

Adjusted EBITDA is estimated to lie within $1.7-$1.8 billion compared with the previous forecast of $1.65-$1.80 billion.

Diluted net income per share is anticipated to be 60-80 cents in 2021, up from the prior outlook of 25-60 cents.

Net interest expense is expected to lie in the range of $880 million to $900 million, lower than the previous guidance of $895-$905 million.

Net cash provided by operating activities are forecast between $300 million and $400 million, up from the prior projection of $200-$300 million.

The guidance for this year’s capex remained unchanged with the prior outlook.
 

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 -36.99% due to these changes.

VGM Scores

Currently, Community Health Systems has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 indicates a downward shift. 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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Community Health Systems, Inc. (CYH): Free Stock Analysis Report
 
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