KeyBanc Downgrades Community Health (CYH) to Sector Weight

KeyBanc downgraded Community Health (NYSE: CYH) from Overweight to Sector Weight. Analyst Jason Gurda said valuation seems fair, noted limited earnings upside and pointed out that comps get more difficult.

"We are downgrading our rating on CYH shares to Sector Weight based on: 1) valuation; 2) our view that there is limited opportunity for upside to our earnings estimates; and 3) our expectation for mid-single-digit, longer-term EBITDA growth. On the positive side, the Company should see increased benefits from healthcare reform when it reports its 2Q results due to the slow start of the 2015 Medicaid expansions in Pennsylvania and Indiana," said Gurda.

"CYH, like the other hospital operators, faces increasingly difficult volumes comps through the year, which we believe will likely lead to slowing volume growth trends. While this is already reflected in our earnings estimates, we believe that the shares could react negatively if adjusted admissions growth does not remain positive in the back half of the year," continued the analyst.

Gurda added, "Our estimates for 11.6% EBITDA growth and 23.6% EPS growth in 2015 primarily reflect synergies from the HMA acquisition and increased benefits from healthcare reform; two factors that are not expected to be a meaningful driver of longer-term earnings growth. On a more sustained basis, we are modeling 2016 and 2017 EBITDA growth for CYH at 4.9% and 4.4%, respectively."

For an analyst ratings summary and ratings history on Community Health click here. For more ratings news on Community Health click here.

Shares of Community Health closed at $62.41 yesterday.

You May Also Be Interested In

• Community Health (CYH) PT Lowered to $4.50 at Oppenheimer
• Midday movers: Meta, IBM, Caterpillar fall; Chipotle rises
• Premier Financial Corp. (PFC) PT Lowered to $23 at Keefe, Bruyette & Woods