Markets

Is it the Right Time to Offload LifePoint Health (LPNT) Stock?

LifePoint Health Inc.LPNT seems to have fallen on hard times. In 2016, the shares declined 22.6%, while the Zacks categorized Medical Hospital industry lost only 9.7%. We note that the company has been facing multiple headwinds like unprofitable acquisitions, decline in enrollment and rising level of bad debts over the last few years. The underperformance of the stock indicates dwindling shareholders' confidence on it.

2016 Full Year Price Chart

While the company's less profitable acquisitions have limited its bottom-line growth, high volumes of uninsured patients have substantially raised the level of its bad debts. Volatility in earnings due to seasonality has also weakened its underwriting results. Furthermore, decrease in short-stay admissions and reduced readmissions have dealt a severe blow to its top line.

LifePoint Health has been witnessing a rise in its expenses since 2006. Over this period, costs have increased at a CAGR of 12%, whereas revenues have grown at a rate of only 9.33%. No doubt, this poses a serious threat to the company's profitability.

Adding to the company's woes is the possibility of President Donald Trump repealing the Affordable Care Act (ACA). This has made the prospects of entire U.S. hospital sector uncertain as the hospital industry had significantly benefited under the ACA through the gradual decline in bad debts. Hence, any change in the ACA is likely to leave millions of Americans uninsured and unable to pay for hospitalization. Most companies from this space, such as Universal Health Services Inc. UHS , Acadia Healthcare Company, Inc. ACHC and HCA Holdings, Inc. HCA , are likely to be affected by such a development and LifePoint Health is no exception.

With respect to earnings trend, the company missed estimates in two of the last four quarters with an average negative surprise of 1.7%. The Zacks Consensus Estimate is currently pegged at $1.07, reflecting a year-over-year decline of 3.2%. The company is set to release fourth-quarter 2016 results on Feb 10, 2017.

Zacks' Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Universal Health Services, Inc. (UHS): Free Stock Analysis Report

LifePoint Health, Inc. (LPNT): Free Stock Analysis Report

HCA Holdings, Inc. (HCA): Free Stock Analysis Report

Acadia Healthcare Company, Inc. (ACHC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

ACHC HCA UHS

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More