U.S. hospital company Community Health Systems, Inc. CYH recently announced that its subsidiary has agreed to divest the Lake Norman Regional Medical Center, along with related businesses, to Duke Health. The deal is valued at around $280 million.

The 123-bed facility is located in Mooresville, NC. The deal is expected to complete in the first quarter of 2025. This transaction aligns with CYH's ongoing strategy, as the hospital was previously identified as a potential divestiture during the company's third quarter earnings call. It has a $1 billion divestiture plan this year.

Over the past four years, CYH has divested around 70 hospitals, a strategy aimed at improving profitability, cash flow, and margins, thereby positioning the company for stronger financial performance. However, not all sales have been successful. Its planned $120 million sale of three Pennsylvania hospitals to WoodBridge Healthcare was recently terminated due to WoodBridge's inability to secure funding.

As of Sept. 30, 2024, it had cash and cash equivalents worth only $33 million, while long-term debt amounted to a hefty $11.5 billion. Its debt-to-capital of 116% is significantly higher than the industry average of 84.68%. As such, its divestiture efforts could provide crucial debt reduction opportunities.

It will also free up capital for investing in remaining hospitals and adding capacity to address the growing demand for its services. It has several de novo and expansion projects for inpatient facility development, as well as service line expansion projects in the pipeline. Acquisitions and partnerships will continue to play a crucial role in building Community Health’s growth trajectory.

Recently, CYH expanded its footprint by acquiring urgent care centers in Arizona from Carbon Health through its subsidiary, Northwest Urgent Care, part of Northwest Healthcare. This acquisition increased Northwest Healthcare’s network to over 80 care sites.

CYH Price Performance

Community Health shares have gained 51.7% in the past year compared with the 20% rise of the industry it belongs to.

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Zacks Rank & Key Picks

Community Health currently has a Zacks Rank #3 (Hold).

Some better-ranked and promising stocks in the broader Medical sector are Pediatrix Medical Group, Inc. MD, CareDx, Inc. CDNA and Encompass Health Corporation EHC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Pediatrix Medical’s current-year earnings indicates 7.1% year-over-year growth. MD beat earnings estimates in three of the trailing four quarters and met once, with an average surprise of 9.9%. The consensus mark for its current-year revenues is pegged at $2 billion.

The Zacks Consensus Estimate for CareDx’s current-year earnings indicates a 167.2% year-over-year improvement. CDNA beat earnings estimates in each of the trailing four quarters, with an average surprise of 135.2%. The consensus mark for revenues implies 17.5% growth from the year-ago period.

The Zacks Consensus Estimate for Encompass Health’s 2024 earnings implies a 17.6% increase from the year-ago reported figure. EHC beat earnings estimates in each of the trailing four quarters, with an average surprise of 13.6%. The consensus mark for its current-year revenues is pegged at $5.34 billion, which indicates an 11.2% year-over-year increase.

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