Hospital Chains Skid After Community Health Warns on Quarterby
Ratings cut on Community Health as Obamacare benefits wane
HCA Holdings, Tenet Healthcare chains fall in New York
Community Health Systems Inc. fell 35 percent after the hospital chain’s preliminary earnings report disappointed, leading analysts to cut their ratings on the stock because of diminishing benefits from Obamacare.
The shares tumbled to $26.30, the lowest closing price since August 2012. HCA Holdings Inc., the biggest U.S. hospital chain, and Tenet Healthcare Corp. also fell.
HCA said last week that its quarterly earnings would be hurt by an increase in labor costs and uninsured patients. The sustained poor results from hospitals suggest that the benefits of health reform in the U.S. have run out, said Sheryl Skolnick, an analyst with Mizuho Securities USA.
“The nightmare of health care continues and we’re now convinced it is time to get out of the way,” she said in a note to clients, cutting her rating on Community Health to neutral from buy.
Raymond James analyst John Ransom and Chris Rigg of Susquehanna Financial also cut their ratings on the stock to the equivalent of neutral from buy.
Tenet, based in Dallas, fell 19 percent to $28.24. HCA, based in Nashville, Tennessee, dropped 7.2 percent to $66.08.
Community Health’s third-quarter adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, was about $661 million, down from $750 million a year before, the Franklin, Tennessee-based hospital chain said in a statement late Wednesday. Analysts had projected Ebitda of $759 million on average. Revenue was about $4.85 billion, the company said, compared with the $4.98 billion average of analysts’ estimates compiled by Bloomberg.
The company is expected to report full results Nov. 2.
In a statement late Thursday, Tenet reaffirmed its third-quarter forecast for adjusted Ebitda of $550 million to $600 million. Its shares recovered some ground in late trading.
Envision Healthcare Holdings Inc. also warned that quarterly earnings would miss analysts’ estimates and reduced its forecast for 2015 Ebitda to a range of $600 million to $605 million, down from $653 million to $665 million. It also forecast adjusted profit of $1.28 to $1.30 a share. The Greenwood Village, Colorado-based company said sales growth was slower than expected, and labor costs rose with more use of temporary workers.
Envision led other providers of contract health services lower, falling 33 percent to $24.37 at 1:29 p.m. Team Health Holdings Inc., based in Knoxville, Tennessee, fell 22 percent to $48.39, and AmSurg Corp., based in Nashville, slipped 13 percent to $62.26.