Analyst Paula Torch at Avondale Partners says investors should take advantage of the little drop in shares of HCA Holdings since the hospital giant’s second-quarter profit report and conference call. Torch says HCA executives’ comments about the impact of health care reform may have led to the 7 percent intraday drop in HCA shares (Ticker: HCA) Wednesday. (They rebounded later in the day but gave up another 1 percent Thursday.)
Torch says not to pay any mind to that. HCA’s operations are on track, with strong volume trends offsetting a little pricing softness. On top of that, she said, the company’s financial muscle will continue to give it the option to add to that growth via M&A.
While HCA continues to utilize free cash flow to pay down its long-term debt, Management stressed that they have the flexibility to lever up to 3.5x to 4.5x to maintain its active acquisition pipeline, especially in the outpatient space.
Torch’s target for HCA shares, which closed Thursday’s trading at $91.38, is $103.
Community Health Systems executives and their peers at the Metro Health hospital system in the Grand Rapids region have pulled the plug on a planned $260 million acquisition by the locally based industry leader. The parties' talks were first made public almost two years ago, and a succesful deal would have taken CHS into Michigan for the first time.
Metro Health opted to pursue a deal with Community Health Systems after rejecting proposals from other for-profit and nonprofit health systems, including the University of Michigan Health System and Livonia-based Trinity Health — the parent corporation of Mercy Health Saint Mary’s in Grand Rapids and Mercy Health Muskegon.
Community Health Systems has sold Payson Regional Medical Center in Arizona to Banner Health.
Terms of the sale of the 44-bed hospital were not disclosed. Banner Health is a Phoenix-based nonprofit health system with 23 hospitals in six states. Following the deal, CHS will continue to operate three hospitals in Arizona.
Separately, The Ledger-Enquirer in Columbus, Georgia, reports that CHS execs have ended their talks with officials from the 376-bed St. Francis Hospital there. A buyout would have grown CHS' hospital network in Georgia to six.
Shares of CHS (Ticker: CYH) were down Friday afternoon to $58.51. Year to date, they're up 8.5 percent.