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The Ratings Game: Hospital stocks tumble after HCA and Tenet’s latest earnings fall short of expectations

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Hospital stocks plunged in trading on Friday after two leading hospital companies — HCA Healthcare Inc. and Tenet Healthcare Corp. — failed to meet investor expectations for the third quarter.

HCA’s
HCA,
-5.73%

stock was down 8.6% after the hospital operator said revenue in the third quarter of this year came in short, at $14.9 billion, slightly below the FactSet consensus of $15.0 billion. Same-facility admissions and emergency-room visits were both down for the quarter, although surgeries were up. Further, the company usually shares adjusted EBITDA guidance for the following year on its third-quarter earnings call, according to Mizuho Securities analyst Ann Hynes. However, it didn’t do so this morning.

“HCA noted Q3 is likely the first normal quarter (lower COVID) since the start of the pandemic and, as a result, wants three more months of data to assess the new normal,” she wrote in an investor note. “While we think this is fair given the macro environment, this level of uncertainty from a company like HCA will likely serve as a near-term overhang on the stock.”

Tenet’s
THC,
-30.96%

stock also took a hit, declining 29.9% on Friday, the day after the hospital operator said same-hospital admissions, outpatient visits, emergency-room visits, and surgeries were all down in the third quarter. Baird analysts attributed the quarter’s softness to both the acute-care and surgical businesses.

Additionally, Tenet narrowed — and lowered — its guidance for the year, saying it now expects $19.00 billion to $19.20 billion in net operating revenue for the year, compared with previous guidance of $19.00 billion to $19.40 billion. The FactSet consensus is for $19.23 billion.

“All in, results were worse than low expectations and will legitimately question the bull thesis,” UBS analysts told investors on Thursday.

The move has Tenet on track for its biggest percentage decrease since Nov. 4, 2008, when it fell 36.7%, according to the Dow Jones market data team. The stock has fallen for three straight sessions, shedding 30.3% of its value in that period.

The negative sentiment weighed on two other publicly traded hospital companies. Shares in Community Health Systems Inc.
CYH,
-13.87%

were down 14.3% on Friday, while Universal Health Services Inc.’s
UHS,
-4.31%

stock fell 5.5%. Both companies are set to report earnings next week.

Tenet has declined 53% in the year to date, while HCA is down 25%. The S&P 500
SPX,
+2.37%

has fallen 22% in the year to date.

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