Community Health Systems, Inc.
CYH
is well poised to grow on the back of solid business expansion initiatives. Its business diversification and cost-curbing efforts are impressive.
Community Health — with a market cap of $1.4 billion — is growing on the back of the rising demand for healthcare services. Based in Franklin, TN, Community Health is a leading operator of general acute care hospitals and outpatient facilities in communities across the United States.
Courtesy of solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on to at the moment.
Growth Drivers
Community Health intends to increase capital investment in the existing markets to tap into high return opportunities. It expects 2022 capital expenditures in the range of $500-$600 million, indicating a jump from $469 million in 2021 and $440 million in 2020. This is expected to enable the company to address the rising demand for healthcare services.
Community Health is investing in telehealth, a high-growth area, which witnessed a substantial response during the pandemic. The demand for remote care is expected to grow, given its efficiency and rising popularity. On an annualized basis, Community Health managed to deliver around 650,000 telehealth visits.
With contract labor headwinds expected to phase out as 2022 progresses, the company’s margins will likely improve significantly. Adjusted EBITDA for this year is estimated within $1,825-$1,975 million, whose upper limit indicates a rise from the 2021 level of $1,969 million. Also, Community Health’s 2022 net operating revenues are expected in the range of $12.6-$13.1 billion, indicating a significant rise from the year-ago level of $12.4 billion. The Zacks Consensus Estimate for 2022 revenues is currently pegged at $12.8 billion.
The company’s cash flow situation is expected to improve this year. Net operating cash flow (excluding the repayment of Medicare-accelerated payments) is forecast within $950-$1,100 million for 2022. Net cash used in operations was $131 million in 2021. This reflects growing strength in operations.
Earnings Estimates
The Zacks Consensus Estimate for Community Health’s 2021 earnings is pegged at $1.29 per share, which has witnessed five upward revisions and one downward movement in the past 60 days. The company beat earnings estimates in each of the last four quarters, with an average of 573.9%.
Community Health Systems, Inc. Price and EPS Surprise
Community Health Systems, Inc. price-eps-surprise
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Community Health Systems, Inc. Quote
Key Concerns
There are a few factors that are impeding the growth of the stock lately.
Balance sheet weakness can affect Community Health’s financial flexibility. As of Dec 31, 2021, it had cash and cash equivalents worth only $507 million, while long-term debt amounted to $12.1 billion. Also, its return on assets — a profitability measure — was 2.1% compared with the industry average of 9.4%. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.
Some Better-Ranked Players
Some better-ranked stocks in the
Medical
space include
Neuronetics, Inc.
STIM
,
Galecto, Inc.
GLTO
and
Axcella Health Inc.
AXLA
, each carrying a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Neuronetics develops products to help people suffering from neuro health conditions. Based in Malvern, PA, Neuronetics’ bottom line for 2022 is expected to rise 1.6% year over year. In the last four quarters, STIM beat earnings estimates twice and missed on the other occasions.
Galecto creates molecules utilized for treating inflammation, fibrosis, cancer and other drugs. The Zacks Consensus Estimate for GLTO’s 2022 bottom line has improved 1.4% in the past 30 days. Galecto beat earnings estimates thrice in the last four quarters and missed once, with an average surprise of 2.5%.
Axcella Health utilizes endogenous metabolic modulator compositions to treat complex diseases. The consensus mark for AXLA’s 2022 earnings indicates a 3.4% year-over-year rise. Headquartered in Cambridge, MA, Axcella Health beat earnings estimates twice in the last four quarters, met once and missed on another occasion, with an average surprise of 0.6%.
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