(Bloomberg) — Stocks of hospital operators are falling harder than the broader market on Friday after earnings reports from Tenet Healthcare Corp. and industry-giant HCA Healthcare Inc. underwhelmed investors.
Tenet plunged by as much as 29%, the most intraday since November 2008, after its net operating revenue guidance for the year was trimmed, taking the outlook below the average view on Wall Street. HCA fell as much as 12% after its third-quarter results included revenue that narrowly missed consensus expectations, erasing more than $6 billion in value from its market cap. Peers Universal Health Services Inc. and Community Health Systems Inc. are following them lower as the broader equities market also falls, declining as much as 12% and 19% respectively.
Hospitals have faced challenges this year over receding Covid-19 patients and the trajectory of the recovery of non-Covid procedure volumes that were expected to rebound as the pandemic ebbs. Elevated labor costs due to contract staffing have also been hurdles. When the pair of operators posted their second-quarter earnings in July, the sector was buoyed by the results that came in stronger than analysts expected amid worries over weaker demand.
Tenet’s shares are getting hit by operational guidance that falls below estimates, writes buy-rated Citi analyst Jason Cassorla. Still, Cassorla says a big decline would offer investors an opportunity in 2023.
Meanwhile, SVB Securities analyst Whit Mayo, who has an outperform rating on HCA, said Friday that investors should snap up the stock on weakness, as the company’s results demonstrated more good than bad.
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