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Why Community Health Shares Are Crashing 15.6% Today

What happened

Only days after competitor HCA reported disappointing second-quarter resultsCommunity Health Systems (NYSE: CYH) provided a peek at its own second-quarter performance. Unfortunately, the preliminary numbers include sliding sales and soaring losses that are pushing shares 15% lower at noon EDT on Thursday.

So what

The major hospital operator reported preliminary net operating revenue of $4.14 billion, down 9.7% from the same quarter last year. Management expects that the downturn, plus one-time costs due to selling hospitals and paying off debt early, will result in a net loss of $137 million, or $1.22 per share, in the period. If you back out those one-time costs, you still end up with an adjusted net loss of $0.25 per share.

IMAGE SOURCE: GETTY IMAGES.

Here are the performance details contributing to this past quarter's results:

  • Total admissions fell 10.8% from last year.
  • Same-store admissions dropped 2.5% from last year.
  • Same-store net operating revenue fell 0.7% year over year.
  • Costs for medical specialists, services, and technology also negatively impacted results.

The disappointing performance comes even as the company continues to sell noncore assets in a bid to get itself into better financial shape.

Now what

Although Community Health is selling hospitals, it remains one of the nation's largest hospital operators, and that means it's heavily exposed to potential fallout associated with legislative attempts in Washington that could reduce insurance coverage and cause write-offs to grow.

The company's second-quarter results and its full-year outlook for 2017 do little to offset the legislative risk. Management now anticipates that same-store admissions will decline by 1% to 2% and that adjusted EBITDA will be between $1.825 billion and $2 billion in 2017. 

For this company to get back in the winner's circle, it will need to complete its right-sizing efforts and get itself back to reporting same-store admissions growth. A political stalemate that keeps more individuals insured would help too. In the meantime, there seems to be little incentive here to buy shares on this drop.

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Todd Campbell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.