Community Health Systems (CYH) reports second quarter loss and lags revenue estimates

VSCommunity Health Systems (CYH) posted a quarterly loss of $2.52 per share against a Zacks consensus estimate of a loss of $0.01. That compares to earnings of $0.23 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents a profit surprise of -25,100%. A quarter ago, this acute care hospital operator was expected to post a profit of $0.13 per share when it was actually producing a profit of $0.14, delivering a surprise of 7.69%.

In the past four quarters, the company has exceeded consensus EPS estimates three times.

Community health systems, which is part of the Zacks Medical – Hospital segment, posted revenue of $2.93 billion for the quarter ended June 2022, missing Zacks’ consensus estimate by 6.60%. That compares to revenues of $3.01 billion a year ago. The company has exceeded consensus revenue estimates only once in the past four quarters.

The sustainability of the immediate stock price movement based on recently released numbers and future earnings forecasts will primarily depend on management’s comments on the earnings call.

Community health systems stocks have lost about 62.3% since the start of the year compared to a decline of -17.7% for the S&P 500.

What’s next for community health systems?

With Community Health Systems underperforming the market so far this year, the question on investors’ minds is: what’s next for the stock?

There is no easy answer to this key question, but a reliable measure that can help investors answer it is the company’s earnings outlook. This includes not only current consensus earnings expectations for the upcoming quarter(s), but also how those expectations have changed recently.

Empirical research shows a strong correlation between short-term stock movements and trends in earnings estimate revisions. Investors can track these revisions on their own or rely on a proven scoring tool like Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Prior to this publication of the results, the trend of the revisions of the estimates for the community health systems: unfavourable. While the magnitude and direction of estimate revisions may change following the release of the company’s earnings report, the current situation translates into a Zacks No. 5 ranking (strong sell) for the stock. Thus, stocks are expected to underperform the market in the near future. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how the estimates for the next few quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.31 on $3.19 billion in revenue for the upcoming quarter and $0.91 on $12.76 billion in revenue for the current fiscal year.

Investors should be aware that the outlook for the sector can also have a significant impact on stock performance. In terms of Zacks industry rankings, Medical – Hospital is currently in the bottom 13% of over 250 Zacks industries. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

Another stock in Zacks Medical’s broader sector, SmileDirectClub (SDC), has yet to report results for the quarter ended June 2022. Results are expected to be released on August 8.

The direct-to-consumer tooth-straightening company is expected to post a quarterly loss of $0.14 per share in its upcoming report, which is no change from the year-ago quarter. The consensus EPS estimate for the quarter remained unchanged for the past 30 days.

SmileDirectClub revenue is expected to be $145.44 million, down 16.5% from the prior year quarter.

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