Zacks Investment Research downgraded
Select Medical Holdings Corporation
) to a Zacks Rank #5 (Strong Sell) on Nov 30, 2013.
Why the Downgrade?
Select Medical has witnessed downward estimate revisions after
reporting mixed third-quarter 2013 results. Over the last 30
days, estimates declined with the 2013 Zacks Consensus Estimate
going down by 4.3% to 90 cents per share (representing a
year-over-year decline of 16.36%). The Zacks Consensus Estimate
for 2014 also declined 7% to 93 cents per share over the same
period with estimates moving downwards. Select Medical delivered
negative earnings surprise in two of the last three quarters with
a negative average surprise of 4.5%.
On Oct 31, Select Medical reported third-quarter earnings per
share of 17 cents, missing the Zacks Consensus Estimate by 2
cents and the year-ago earnings by 3 cents. The decline was
mainly attributable to Medicare sequestration cuts and a
reduction in the Medicare revenue per patient day.
The quarter witnessed a 2.7% increase in operating expenses owing
to high cost of services, general and administrative expenses and
bad debt expenses. This increase overpowered the 1.3% increase in
revenues and led to a margin contraction. Moreover, depreciation
and amortization expenses also increased for Select Medical owing
to losses incurred by start-up companies and joint ventures.
In terms of the financial position of the company, Select
Medical experienced a year-over-year decline in operating cash
flow in the first nine months of 2013. The debt-burden of the
company also increased over the first nine months of 2013 when
compared to year-end 2012.
The company also expects to incur a negative $15 million
impact after mitigation from the 25 per cent rule in 2014, higher
than that estimated earlier (between $5 million and $10
Other Stocks to Consider
ACADIA HEALTHCR (ACHC): Free Stock Analysis
CENTENE CORP (CNC): Free Stock Analysis
SELECT MEDICAL (SEM): Free Stock Analysis
VCA ANTECH INC (WOOF): Free Stock Analysis
To read this article on Zacks.com click here.
Some better-ranked stocks in the healthcare services space
Acadia Healthcare Company, Inc.
VCA Antech Inc.
). All these stocks hold a Zacks Rank #2 (Buy).