Leerink Partners Downgrades Community Health (CYH) to Market Perform on Weaker Earnings Achievability, Delays in Delevering
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Leerink Partners downgraded Community Health (NYSE: CYH) from Outperform to Market Perform with a price target of $13.00 (from $21.00) citing weaker EBITDA achieveability and delays in de-levering.
Analyst Ana Gupte committed, "We are downgrading CYH from OP to MP and lowering our PT from $21 to $13. Our downgrade is predicated on continued weakness on a) earnings achievability and b) timing delays in Delevering with cash flow from asset sales related to hospital portfolio rationalization. Our 2016 EBITDA estimate is lowered from $2,600 MM to $2,437 MMM post the miss and guide down in 2Q. Our 2017 EBITDA estimates are lowered from $2,635 MM to $2,440 MM. While our May 2016 upgrade post 1Q was primarily related to the sale of underperforming Hospitals, the timing looks uncertain at this time and at least delayed to 4Q from 3Q though two additional facilities have been put up for sale and inItial portfolio of 10 hospitals has been restructured at potentially higher multiples. The reductions of underperforming employed physicians are not bringing the directionally guided improvements in earnings achievability. While the strategy still remains sound, centered around rationalization of underperforming employed physicians, and de-levering from the cash flow generated through asset sales of underperforming hospitals, the timing and predictability of execution is muddy at this time. Our revised PT reflects an EV to EBITDA multiple of 6.7x on our revised 2017 EBITDA estimate."
Shares of Community Health closed at $11.94 yesterday.
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