Why Is Community Health Systems (CYH) Up 3.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Community Health Systems (CYH). Shares have added about 3.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Community Health Q1 Earnings & Revenues Miss Estimates

Community Health reported adjusted net loss of $1.59 per share for first-quarter 2020, wider than the Zacks Consensus Estimate of a loss of 53 cents per share. Notably, the company had reported a loss of 53 cents per share in the prior-year quarter.

The company’s results were impacted by lower revenues.

Quarterly Operational Update

In the first quarter, net operating revenues were $3 billion, which missed the Zacks Consensus Estimate by 4.8%. Further, the top line plunged 10.4% year over year due to reduction in admissions. The company also witnessed lesser number of patient visits due to the onset of COVID-19 pandemic in the latter half of March.

The first quarter witnessed a decrease of 13.3% and 12.8% in admissions and adjusted admissions, respectively, compared with year-ago figures.
As of Mar 31, 2020, number of licensed beds came in at 15,620, which indicates a decline of 7.9% from the prior-year quarter.

For first-quarter 2020, the company delivered total adjusted EBITDA of $309 million, down 21% year over year.

Total operating costs and expenses of $2.9 billion were down 8.5% year over year owing to lower salaries and benefits, government and other legal settlements and related costs, supplies, depreciation and amortization, and other operating expenses.

Financial Update

Total assets at fourth-quarter end were $15.4 billion, declining 1.1% from the level at 2019 end.

Cash and cash equivalents of $246 million were up 13.9% from the level as of 2019 end.

In the first quarter, net cash provided by operating activities was $57 million, which decreased 57.1% from the year-ago quarter’s reported number.

The company has long-term debt of $13.5 billion as of Mar 31, 2020, up 1% from the level as of Dec 31, 2019.

2020 Guidance Withdrawn

Earlier this month, Community Health repealed initial guidance for 2020 due to the uncertainty prevailing on account of the COVID-19 pandemic.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -75.85% due to these changes.

VGM Scores

Currently, Community Health Systems has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward 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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