Earnings wrap: Community Health Systems, Vanguard

CHS lowers outlook on interest costs and deferred California payment; Vanguard tops expectations despite insurance dip

Community Health Systems reported third-quarter net income from continuing operations of $58.8 million, down about 40 percent from a year ago, but beat analysts' expectations once a loss on the early retirement of debt was excluded. Per diluted share, earnings came in at 86 cents versus the Street's expectation of 84 cents.

In a messy set of numbers — the income from continuing operations line item needed four footnotes — CHS execs said their Q3 revenues rose 9 percent to more than $3.2 billion and that same-store adjusted admissions rose 0.8 percent from a year ago, while same-store net operating revenues climbed 4 percent.

"Community Health Systems delivered another strong financial and operating performance in the third quarter," said Chairman, President and CEO Wayne Smith. "We continue to demonstrate favorable results on a same-store basis with revenues up four percent and volume trends stabilizing. Our standardized business platform has enabled us to reduce costs, recruit qualified physicians and improve local hospital services."

While investors will like that volumes are holding their own— a data point that "pleasantly surprised" one analyst — they also are likely to focus Wednesday morning on the company's lower guidance for full-year EPS. That is now expected to range from between $3.80 and $3.95 from $3.90 to $4.10. Smith and his team said the new numbers take into account that a California Medicaid payment that had been expected late this year will now likely come in early 2013 as well as an additional $10 million in 2012 interest costs stemming from a series of refinancings that have pushed CHS' long-term debt maturities to 2017 and beyond.

Shares of CHS (Ticker: CYH) closed trading last Friday at $26.79. They're up more than 50 percent so far in 2012.

 
Over at Vanguard Health Systems, executives reported a fiscal first-quarter profits of $14.9 million, reversing a year-ago loss of $24 million. Excluding about $51 million of 2011 costs from debt extinguishment and acquisitions, pre-tax profits from continuing operations rose to $19.7 million from $12 million.

Per diluted share, earnings came in at 17 cents, two cents better than analysts had been looking for. However, Avondale Partners analyst Kevin Campbell said a number of one-time items, including a lower tax rate and a bigger-than-expected credit for adopting technology, contributed to the beat.

Revenues rose about 2 percent to $1.47 billion, with insurance plan premiums falling by $35 million because of cost-cutting moves in Arizona's Medicaid plan. Same-store adjusted discharge fell 0.8 percent, while revenue per adjusted discharge rose 2 percent. That helped hospital EBITDA margins climb to 9.3 percent from 8.2 percent a year ago.

Looking ahead, Vanguard's leaders affirmed their guidance for earnings and other metrics, including capital spending, which has been ramping up in Detroit and Texas.

Shares of Vanguard (Ticker: VHS) closed Friday trading at $10.45 and are up about 2 percent year to date.