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Community Health (CYH) Soars 168.6% YTD: More Room to Run?

Zacks Equity Research
·3-min read

Community Health Systems, Inc. CYH has been in investors’ good books on the back of its strategic initiatives and cost-reduction efforts.

Shares of this currently Zacks Rank #3 (Hold) company have skyrocketed 168.6% year to date against its industry’s decline of 1.8%. Despite the pandemic, the company has performed well so far this year.

The price performance looks stellar when compared to other companies’ stock movements in the same space, such as HCA Healthcare, Inc. HCA, Tenet Healthcare Corporation THC and Acadia Healthcare Company, Inc. ACHC. Both HCA healthcare and Acadia Healthcare have gained 2.7% and 26%, respectively, while Tenet Healthcare has lost 16.4% in the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It recently reported third-quarter 2020 adjusted net income of 18 cents per share, beating the Zacks Consensus Estimate of 10 cents by 80%. Moreover, the bottom line rebounded from the loss of 29 cents per share reported in the prior-year quarter.

The company’s results benefited from lower expenses.

Its restructuring initiatives reined in its costs to a great extent. Total operating costs and expenses were down 15.5% year over year in the first nine months of 2020. Going forward, the company’s expenses are expected to improve further on the back of its planned business rejig.

Moreover, its plan to acquire facilities every year has enhanced its portfolio. It generally targets hospitals that cater to relatively non-urban and suburban communities wherein management can add value through specialty medical service expansion, economies of scale, surplus investment in new technology and efficient process management. In the first nine months of 2020, it spent $1 million on the buyouts of operating assets and related businesses.

Community Health continues to divest hospitals on a regular basis to focus to streamline its operations. Shedding small assets helps it focus on its core business that comprises large hospitals, which in turn, promises debt payment.

The company executed its divestiture plan over the last couple of years in order to create a solid portfolio. It has received $340 million worth of sale proceeds year to date from divestitures.

The company also made investments in telehealth that gained a huge response amid the COVID-19 situation. In the second and the third quarter, it witnessed high volumes of Telehealth visits. We expect this buoyant demand for telemedicine to continue given the current scenario.

Is the Bull Run Likely to Continue?

We expect the company to continue performing well as it steadily pursues its strategic goals to pay down its debts and focus on its core operations. Moreover, against the current drop, the demand for telehealth services is likely to stay, which in turn, will provide the company with an extra cushion going forward.

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Community Health Systems, Inc. (CYH) : Free Stock Analysis Report
 
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
 
HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report
 
Acadia Healthcare Company, Inc. (ACHC) : Free Stock Analysis Report
 
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Zacks Investment Research