Community Health Systems, Inc. CYH recently announced that it has postponed the proposed spin-off of Quorum Health Corporation considering the current market conditions. The transaction is now expected to close in the first half of 2016, instead of the previously planned first quarter.
Earlier in Aug 2015, the company had announced plans to establish a new publicly traded hospital company, by spinning off 38 of its hospitals along with Quorum Health Resources – its hospital management and consulting business.
The new independent company, with a portfolio of 38 hospitals and 3,635 licensed beds, is planned to have its headquarters in Middle Tennessee. It will operate in markets where hospitals are the solitary provider of acute care services.
We believe that the postponement is a setback for Community Health, at least in the near term. However, positive share price movement following the news suggests that investors are not overly worried over the rescheduling. Meanwhile, Community Health continues to divest hospitals on a regular basis, which will in turn, help it to focus on large hospitals that operate on higher margins.
Last month, the company completed the sale of Bartow Regional Medical Center, along with related outpatient services, to subsidiaries of BayCare Health System. Community Health also announced a definitive agreement to divest the assets of The Memorial Hospital of Salem County along with related outpatient services to Prime Healthcare Foundation.
In conjunction with the divestures, Community Health is focused on pursuing acquisitions that will benefit its overall business model. The company recently inked a definitive agreement to buy majority stake in two reputed hospitals. Community Health, the nation’s largest hospital operator (by hospital count), will be buying an 80% stake in IU Health La Porte Hospital in La Porte and IU Health Starke Hospital in northwestern Indiana.
The transaction will take Community Health’s Indiana hospital tally to 11. We believe the strategic buyouts will drive the company’s penetration into the healthcare services market, which in turn, will enhance its competitive position as well as drive significant growth.
Zacks Rank and Key Picks
Currently, Community Health carries a Zacks Rank #4 (Sell). Better-ranked stocks in the medical space are Exactech EXAC, DexCom DXCM and Fresenius Medical Care FMS. While Exactech sports a Zacks Rank #1 (Strong Buy), both DexCom and Fresenius Medical Care have a Zacks Rank #2 (Buy).
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 >>
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
Be the first to comment