Avondale Partners analyst Paula Torch has lowered her price target for Community Health Systems from $60 to $40 based on the Franklin company's weak third quarter. However, Torch is maintaining her 'market outperform' rating for the company and says there is opportunity for CHS to improve during the fourth quarter because of the solid performance expected from its legacy facilities.
"Former HMA facilities continue to create a drag on earnings," Torch wrote in a report this week.
Additionally, Mizuho Securities analyst Sheryl Skolnick has cut her price target for the second time in two weeks, from $34 to $30. In late October, she slashed her target from $77 after CHS issued a profit warning.
Shares of CHS (Ticker: CYH) were up 3.5 percent mid-day Wednesday to $28.34. Year to date, though they're still down 47 percent.
Four of the top executives at Community Health Systems last week followed Chairman and CEO Wayne Smith's lead in spending thousands of dollars to exercise stock options in the wake of a profit warning that put a hurting on the company's stock. Combined, the quartet spent more than $600,000 to add to their holdings.
• CFO Larry Cash spent $181,800 on 10,000 options.
• Executive Vice President and Secretary Rachel Seifert spent almost $91,000 to exercise 5,000 options that would have expired in 2019.
Shares of CHS (Ticker: CYH) have done little since plummeting following Smith & Co.'s warning. They closed Friday trading at $28.04 and are off nearly 50 percent year to date.
Paula Torch at Avondale Partners has updated her models for HCA Holdings after the hospital giant formally reported its third-quarter numbers.
Torch is still “confident in management's ability to manage through HR issues which pressured 3Q” and likes that volumes are holding up.
Still, the cost of drugs and people could put pressure on all hospital operators in 2016 and beyond and has Torch “baking in an increased level of conservatism into our numbers.” She has adjusted her 2016 estimates and trimmed her price target to $85 from $103. But she’s reiterating her ‘market outperform’ rating and says investors should look at weakness as a buying opportunity.
At about noon Wednesday, HCA (Ticker: HCA) was changing hands at $68.88, flat on the day.
Two more analysts tracking Community Health Systems have formally reacted to the company's profit warning last week. Most notably, Ana Gupte at Leerink Partners has slashed her price target for the hospital owner to $33, less than half the $75 she had expected CHS to reach in the coming year. She now rates CHS at 'market perform' instead of 'outperform' and says, among other things, that there is little sign medical cost trends will reverse themselves soon.
Over at Robert W. Baird, veteran analyst Whit Mayo has lowered his CHS rating from 'outperform' to 'neutral.' Mayo's new target for the Franklin-based company is $32, which is 15 percent above where the stock (Ticker: CYH) was changing hands in early Tuesday trading.
Vanderbilt University Medical Center officials have contracted with Aramark to have the Philadelphia-based company manage the life cycles of various biomedical, laboratory and diagnostic imaging equipment at its multi-facility Midtown campus as well as its network of more than 200 clinics around the region. Aramark is best known for its retail dining services but its health care business works with more than 1,100 organizations around North America.
Community Health Systems Chairman and CEO Wayne Smith is looking to send investors a message. Days after his team warned that third-quarter profits would be well below analysts' expectations — and the market lopped more than $1.5 billion off the company's market cap — Smith (pictured) on Monday spent more than $900,000 to exercise a batch of stock options that would have expired in 2019 and then held on to the resulting shares. The move took the 69-year-old's total direct and indirect holdings of Franklin-based CHS (Ticker: CYH) to nearly 1.8 million shares.
Smith's big option exercise came after his largest investor, hedge fund Glenview Capital, on Friday said it had trimmed its CHS stake by about 2 percent — for proceeds of nearly $8 million — the day before, when CHS plummeted by more than 30 percent. An interesting side note to that filing: Glenview on Thursday spent nearly $15 million to add to its holdings in Tenet Healthcare as that company, too, gave up a lot of ground.
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