Fitch downgrades CHS from stable to negative after discouraging earnings report

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Fitch Rankings revised Group Well being Techniques’ score outlook from steady to damaging Tuesday after the for-profit hospital operator reported a difficult first half of this 12 months, in keeping with a launch.

For the primary half of the 12 months, the chain reported a $327 million internet loss and $6.04 billion in income, in comparison with a $58 million internet loss and $6.02 billion in income throughout the first half of final 12 months.

That despatched CHS’ inventory down 36% in morning buying and selling following its earnings launch.

Difficult working dynamics like lower-than-anticipated quantity, decrease internet income per adjusted admission and important contract labor prices impacted earnings within the quarter, CEO Tim Hingtgen mentioned in a launch.

The score company’s downgrade displays “important will increase in labor prices and weak point in volumes and acuity combine driving a downturn within the firm’s income and margin ranges,” in keeping with Fitch.

CHS lowered its full-year expectations within the first quarter of this 12 months when its spending on contract labor greater than doubled 12 months over 12 months, executives mentioned throughout a name with buyers on the time.

The chain once more lower income steerage for the complete 12 months in Q2 to replicate shortfalls and expectations for continued quantity softness this 12 months, Jefferies analysts wrote in a notice.

CHS nonetheless advantages from its strengthened steadiness sheet and liquidity after debt refinancing and trade transactions, Fitch mentioned.

It additionally has a portfolio of hospitals and ambulatory services repositioned by divestitures and price reductions and is continuous to put money into increasing historically inpatient companies to outpatient settings, like ambulatory surgical procedure facilities, the discharge mentioned.

Fitch additionally affirmed the long-term issuer default scores of CHS at B-.

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