Acadia Healthcare (NASDAQ: ACHC) is down 9.5% at 1:58 p.m. EDT after burying disappointing preliminary third-quarter earnings in a press release today.
The press release started off well enough with a headline of "Acadia Healthcare Signs Definitive Agreement for Sale of U.K. Facilities in Fulfillment of Its Previously Announced Undertakings to the CMA." Sounds innocuous enough. Acadia Healthcare is selling 21 existing behavioral health facilities and one that it's working on opening to BC Partners for 320 million pounds (approximately $390 million).
The deal, which investors knew was coming, was done to satisfy concerns the U.K.'s Competition and Markets Authority (CMA) had about Acadia Healthcare buying Priory Group. The $2.2 billion deal closed earlier this year, but Acadia hasn't been able to integrate Priory's more than 300 facilities until the CMA signs off on the divesture. The agency is supposed to confirm the deal satisfies its concerns on or before Nov. 18 and the deal can close shortly after that.
It took until the fourth paragraph of the press release for Acadia to get to the bad news: The company estimates that third-quarter revenue will come in at $735 million and expects adjusted income from continuing operations of $0.58 per share, compared to $0.62 per share in the year-ago quarter.
Management blamed the aforementioned issues with CMA for income in the U.K. coming in lower than expected. Management was working on getting the facilities sold and workers were probably worried about whether they'll have a job after the transaction, which doesn't make for the most productive staff. In the U.S., Acadia also noted that growth in same-facility revenue was lower than it had been in the first half of the year and revenue at facilities opened within the last year haven't ramped up as fast as expected.
Investors will get more details on the issues Acadia faces when it releases its full earnings report on Nov. 1. Today's decline could end up being a buying opportunity with the U.K. distractions largely behind the company, but cautious investors should take a wait-and-see approach, getting more information about the issues in the U.S. before buying in.
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