Why Is Community Health Systems (CYH) Up 15.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Community Health Systems (CYH). Shares have added about 15.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Community Health Q2 Earnings Beat, Revenues Down Y/Y

Community Health reported second-quarter 2020 adjusted net income of 85 cents per share against the Zacks Consensus Estimate of a loss of $1.22 per share. Notably, the company had reported a loss of 47 cents per share in the prior-year quarter.

The company’s results benefited from lower operating costs, partially offset by reduced patient volumes.

Quarterly Operational Update

In the second quarter, net operating revenues were $2.5 billion, which missed the Zacks Consensus Estimate by 0.3%. Further, the top line plunged 23.7% year over year due to reduction in admissions. The company also witnessed lesser number of patient visits in April owing to the COVID-19 pandemic, which somewhat bounced back in May and June.
The second quarter witnessed a decrease of 23.6% and 29.2% in admissions and adjusted admissions, respectively, compared with year-ago numbers.

As of Jun 30, 2020, number of licensed beds came in at 15,562, which indicates a decline of 8.8% from the prior-year quarter.

For second-quarter 2020, the company delivered total adjusted EBITDA of $454 million, up 12.9% year over year.

Total operating costs and expenses of $2.2 billion were down 30.3% year over year due to lower salaries and benefits, supplies, other operating expenses, government and other legal settlements and related costs, and depreciation and amortization. Also, interest expenses of $260 million declined 1.9% in the second quarter.

Financial Update

Total assets at second-quarter end were $16.4 billion, which increased 5.2% from the level at 2019 end.

Cash and cash equivalents of $1.6 billion soared 618.5% from 2019 end.
In the first half of 2020, net cash provided by operating activities was $1.7 billion, which skyrocketed 545.3% from the first half of 2019.

The company has long-term debt of $13.1 billion as of Jun 30, 2020, down 2.1% from the level as of Dec 31, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 108.42% due to these changes.

VGM Scores

Currently, Community Health Systems has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. 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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