Ominous Plunge for Community Health Systems (NYSE:CYH)


Debt-laden hospital operator Community Health Systems (NYSE:CYH) fell by half on Thursday following its warning of a loss in the third quarter.

Shares slumped by 49.65% to $5.05 on huge volume of 59.14 million shares, over 10X the average volume of 5.70 million shares.

Investors should be worried that yesterday’s fall took the price down through the financial crisis low of $8.57 touched in November 2008.

Shares have lost over their 90% of their value from the July 2015 high of 52.88.

Community Health Systems (NYSE:CYH)’s profit warning decimates its stock

“The lower than anticipated results were primarily caused by lower than expected volume and the resulting lower net operating revenues, as well as larger than anticipated reductions to reimbursement from state supplemental programs. These results were also affected by a failure to achieve anticipated expense reductions as the Company experienced increases in health insurance costs, costs of state supplemental programs, medical specialist fees, and implant supply costs, among other expenses,” the company warned in a statement.

In the sum, the company will swing from an operating profit of $121 million in Q3 of 2015 to an operating loss of $83 million in Q3 2016. Revenue will fall in that period from $4.85 billion to $4.38 billion.

For full year 2016, adjusted EBITDA for 2016 is now expected to be $2.200 billion to $2.275 billion compared to the previously guided $2.4 billion to $2.55 billion.

The dismal outlook and downhill progression in EBITDA panicked investors into sell mode.

Analysts cudgel Community Health Systems (NYSE:CYH)

Jefferies maintained their Hold rating but cut their price target from $11.75 to $9.00 as the company missed estimates for the third time.

Mizuho switched their rating downward from Neutral to Underperform and assigned a price target of a lowly $3.00.

Baird too chopped their rating from Neutral to Underperform.

Kevin Fischbeck of Bank of America Merrill Lynch reaffirmed an Underperform rating on the stock but lowered the price target from $10 to $6.


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