Compelling Reasons to Hold Acadia Healthcare (ACHC) Stock Now

Acadia Healthcare Company, Inc. ACHC is well positioned for growth on the back of improving patient volumes, admissions, commercial business and growing demand for behavioral health and substance use treatments. The company is actively bolstering its capabilities to address the increasing demand in these critical areas.

Acadia Healthcare, with a market capitalization of $7 billion, operates as a prominent behavioral healthcare services provider in the United States and Puerto Rico. With solid prospects, this Zacks Rank #3 (Hold) stock is deemed worthwhile for holding on to at the moment.

In this analysis, we'll explore the growth drivers and estimates and highlight the key factors investors should monitor. Let’s delve deeper.

The Zacks Consensus Estimate for ACHC’s 2024 earnings is pegged at $3.57 per share, indicating 3.8% year-over-year growth. The estimate remained stable over the past week. Acadia Healthcare beat on earnings in each of the last four quarters, with an average surprise of 6.5%. This is depicted in the figure below.

Acadia Healthcare Company, Inc. Price and EPS Surprise

Acadia Healthcare Company, Inc. Price and EPS Surprise

Acadia Healthcare Company, Inc. price-eps-surprise | Acadia Healthcare Company, Inc. Quote

The consensus mark for 2024 revenues stands at $3.2 billion, suggesting 9.9% growth from a year ago. Headquartered in Franklin, TN, Acadia Healthcare’s top line is poised to capitalize on increasing commercial, Medicare and Medicaid revenues. Our model predicts 8% year-over-year growth in commercial revenues in 2024, along with 8.4% and 10.2% growth in Medicare and Medicaid revenues, respectively.

Furthermore, rising patient days, admissions and average length of stay will bolster its performance going forward. Our model predicts more than 4% year-over-year growth in U.S. same-facility patient days in 2024. We expect admissions and average length of stay to witness a 2.5% and 2% year-over-year increase this year, respectively. Increasing cases of diseases and a growing senior population will keep boosting demand for ACHC’s services.

As such, the company is expected to continue enhancing its capabilities. ACHC expects to add more than 400 beds to existing facilities this year, as stated in its latest earnings report. It targets to inaugurate a maximum of 14 CTCs this year. Also, the company had 21 joint venture partnerships for 22 hospitals, of which 11 hospitals have attained operational status and 11 more hospitals are likely to come online over the next few years. Its expansion capital expenditure for 2024 is anticipated between $425 million and $475 million.

Acadia Healthcare’s performance is expected to receive support from growth in acute inpatient psychiatric facilities and specialty treatment facilities. We expect 2024 revenues from these two units to jump 10.3% and 7.5%, respectively, from the prior year.

Notably, the hospital company expects adjusted EBITDA to be within $730-$770 million in 2024, the mid-point of which suggests 10.7% growth from the 2023 reported figure of $677.7 million. Operating cash flows are forecasted to be in the range of $525-$575 million for 2024.

Key Concerns

There are a few factors that investors should keep an eye on.

Acadia Healthcare faces challenges with escalating expenses. Its total expenses, excluding legal settlements, grew 7%, 9.7% and 14.5% year over year in 2021, 2022 and 2023, respectively. Our projections for 2024 indicate more than 7% growth in the metric due to higher salaries, wages & benefits, professional fees and other operating expenses.

Moreover, the company's return on equity of 11.2% lags behind the significantly higher industry average. However, we believe that a methodical and strategic approach will fuel its long-term growth.

Better-Ranked Stocks

Enhancing the array of healthcare options, promising stocks in the Medical sector include Universal Health Services, Inc. UHS, The Cigna Group CI and Health Catalyst, Inc. HCAT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 27% year-over-year growth. UHS has witnessed two upward estimate revisions over the past 30 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 5.9%.

The Zacks Consensus Estimate for Cigna’s full-year 2024 earnings indicates a 13% year-over-year increase. CI beat earnings estimates in each of the past four quarters, with an average surprise of 2.9%. The consensus mark for revenues suggests 20.4% growth from the year-ago period.

The Zacks Consensus Estimate for Health Catalyst’s 2024 full-year earnings implies a 120% increase from the year-ago reported figure. HCAT beat earnings estimates in each of the last four quarters, with an average surprise of 247.9%. The consensus mark for its current-year revenues is pegged at $308.2 million, which indicates a 4.2% year-over-year increase.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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