Acadia Healthcare (ACHC) Down 3.3% Since Last Earnings Report: Can It Rebound?

Zacks
2024-11-30

A month has gone by since the last earnings report for Acadia Healthcare (ACHC). Shares have lost about 3.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Acadia Healthcare due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Acadia Healthcare's Q3 Earnings Beat Estimates

Acadia Healthcare reported adjusted third-quarter earnings of 91 cents per share, which beat the Zacks Consensus Estimate by 1.1%. The bottom line was flat year over year.

Total revenues increased 8.7% year over year to $815.6 million. The top line missed the consensus mark by a whisker.

The third-quarter earnings benefited from improved volumes and higher patient days.

Q3 Operations

Same-facility revenues of $802.6 million rose 8.6% year over year but fell short of our estimate of $808.6 million. The year-over-year improvement was driven by 3.6% growth in revenue per patient day and a 4.7% increase in patient days.

Admissions grew 2% year over year. The average length of stay grew 2.7% year over year but missed our growth estimate of 3%.

In the overall facility, patient days improved 4.6% year over year while admissions grew 2.4% year over year. Revenue per patient day improved 3.9% year over year, which was higher than our growth estimate of 2.6%. The average length of stay rose 2.1% year over year but lagged our growth estimate of 3.5%.

Adjusted EBITDA climbed 10.5% year over year to $194.3 million but came lower than our estimate of $195.4 million. Adjusted EBITDA margin deteriorated 50 bps year over year to 28.2%. 

Total expenses of $717.1 million declined 30.9% year over year but higher than our estimate of $699.1 million. The year-over-year decrease was due to a legal settlements expense cost recognized in the prior-year quarter and lower transaction, legal and other costs.

Financial Update (as of Sept. 30, 2024)

Acadia Healthcare exited the third quarter with cash and cash equivalents of $82.1 million, which decreased 17.9% from the 2023-end level. It had a leftover capacity of $321.5 million under its $600 million revolving credit facility at the third-quarter end.

Total assets of $5.9 billion increased 9.5% from the figure at 2023-end.

Long-term debt amounted to $1.8 billion, which escalated 34.4% from the figure as of Dec. 31, 2023. The current portion of long-term debt was $71.7 million.

Total equity of $3 billion increased 9% from the 2023-end level. The net leverage ratio was around 2.5X at the third-quarter end.

Net cash provided by operations totaled $13 million in the first nine months of 2024 against $346 million in the prior-year comparable period.

Business Update

Acadia Healthcare added 15 beds to its existing facilities in the third quarter. It also inaugurated one acute care hospital in Madison, WI.

2024 Guidance Updated

Revenues are projected to be between $3.15 billion and $3.165 billion compared with the earlier guided range of $3.18-$3.225 billion. The mid-point of the updated outlook indicates an improvement of 7.8% from the 2023 figure. 

Adjusted EBITDA is estimated to be in the range of $725-$735 million compared with the previous guidance of $735-$765 million. The mid-point of the revised outlook indicates 7.7% growth from the 2023 figure. 

Adjusted earnings per share (EPS) are predicted to be between $3.35 and $3.45 compared with the earlier guided range of $3.45 and $3.65.

Interest expenses continue to be estimated within the band of $110-$120 million. Depreciation and amortization expenses are anticipated to be in the $145-$155 million band. The tax rate is still expected to be in the range of 24.5-25.5%. Stock compensation expenses are still expected to be between $40 million and $45 million.

Operating cash flows are forecasted to be in the range of $525-$550 million. Expansion capital expenditure is anticipated to be between $550 million and $595 million. Maintenance and IT capital expenditures are expected to be in the range of $95-$105 million.

Management still estimates to add more than 400 beds to existing facilities in 2024. It aims to inaugurate a maximum of 14 comprehensive treatment centers. ACHC anticipates opening three inpatient facilities in the fourth quarter of 2024, which comprise two new joint venture facilities.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -13.18% due to these changes.

VGM Scores

At this time, Acadia Healthcare has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Acadia Healthcare has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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