Shares of Community Health Systems, Inc. (NYSE:CYH) scaled a fresh 52-week high of $7.47 on Feb 21, before closing the day at $7.18. The company’s impressive fourth-quarter 2019 earnings performance and its strategic initiatives contributed to this rally.
The Zacks Rank #2 (Buy) stock has gained 48.7% in the past year compared with its industry’s 4.5% growth.
Let’s delve deeper to analyze the factors responsible for this upsurge.
What's Driving This Outperformance?
For the fourth quarter, Community Health reported adjusted income of 40 cents per share. However, the Zacks Consensus Estimate was of a loss of 48 cents per share. The bottom line also came in against the year-ago quarter’s loss of 42 cents per share. Also, the company came up with net operating revenues of $3.2 billion, surpassing the Zacks Consensus Estimate by 2.4%.
After witnessing weak performances over the last few quarters, the company bounced back in the fourth quarter of 2019, courtesy of lower operating expenses. The debt also decreased sequentially, which remains impressive to investors. On a same-store basis, the company’s admissions and adjusted admissions inched up in the period. The company delivered total adjusted EBITDA of $447 million, up 6.7% year over year.
The company closed the divestment of three hospitals on Jan 1, 2020. Given these sell-off, the company expects its same-store metrics and cash flow to improve. The sale of units is also going to improve its leverage ratios.
The company’s restructuring initiatives has reduced its costs to a great extent. In 2018 and 2019, its operating costs and expenses declined 19.1% and 9.9% year over year, respectively. The company’s expenses are expected to improve further on the back of its planned business rejig.
Despite several downsides, such as declining revenues and a weak 2020 guidance, we are hopeful that the company will win back its momentum owing to its solid fundamentals like portfolio rationalization.
Other Stocks to Consider
Investors interested in the medical sector might take a look at some other top-ranked stocks, namely HCA Healthcare, Inc. (NYSE:HCA) , MEDNAX, Inc. (NYSE:MD) and Select Medical Holdings Corporation (NYSE:SEM) , each of which surpassed estimates in the last reported quarter by 0.98%, 1.11%, 55%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Community Health Systems, Inc. (CYH): Free Stock Analysis Report
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MEDNAX, Inc. (MD): Free Stock Analysis Report
Select Medical Holdings Corporation (SEM): Free Stock Analysis Report
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