Mixed Quarter at Community Health

A revenue shortfall fails to impress.
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Community Health Systems

(CYH) - Get Report

has posted stronger quarters.

Net income rose less than 1% to $54.3 million. Meanwhile, operating profits actually fell. Earnings per share of 58 cents did meet Wall Street expectations. Yet revenue, while up 17% to $1.2 billion, fell just shy of analyst targets.

Familiar industry challenges -- weak admissions and bad debt from the uninsured -- took a toll. Same-hospital volumes inched up just 1% during the latest quarter. At the same time, bad-debt expense rose from 10.5% to 11.3% of net revenue during the period.

Some experts had hoped for better. Indeed, Bear Stearns analyst Jason Gurda felt optimistic about Community's results even without any assurance from the company itself.

"We believe CYH can achieve our EPS estimate ... which is a penny higher than consensus," wrote Gurda, who has an outperform rating on Community's shares. Still, "although we believe CYH had a reasonable explanation for withdrawing its near-term guidance (in light of its pending acquisition of Triad), it does raise uncertainty heading into the quarter."

Gurda himself felt that Community would post solid volume growth, continuing a trend seen last quarter, when the company enjoyed its biggest jump in inpatient admissions in nearly two years. Moreover, he figured that insured patients -- rather than those who do not pay -- would fuel much of that new business.

Looking ahead to Thursday, Gurda expects to see improvements from rival rural hospital operator

LifePoint

(LPNT)

as well. He believes that LifePoint will post first-quarter profits that match Wall Street expectations and reach the high end of management's own guidance.

"We are looking for LifePoint's third consecutive quarter of positive volume growth," wrote Gurda, who has an outperform rating on the company's shares. "We are confident that LifePoint can achieve our estimate, as the rapid outflow of physicians appears to have moderated, uninsured growth has stabilized and company comments suggest that it has met or exceeded budget in the first two months of the quarter."

Gurda feels more cautious about urban hospital chains such as

Universal Health Services

(UHS) - Get Report

and

Tenet

(THC) - Get Report

, however. Like many, in fact, he seems unsure about what to expect from Universal altogether.

"We note that UHS reports significant EPS volatility quarter to quarter," wrote Gurda, who has an underperform rating on the company's shares. Moreover, "unlike the rural hospital operators, the urban chains have reported little to no moderation in uninsured growth trends."

Tenet could sure use a break. But Gurda expects the company to report a first-quarter loss of 7 cents a share -- far worse than the consensus estimate -- as the company struggles to win back patients with generous insurance coverage.

Gurda, for one, senses that time could possibly run out on the company's long-awaited turnaround.

"We note that Tenet must start to generate admissions growth -- particularly commercial -- to achieve its longer-term margin expectations," wrote Gurda, who has a peer-perform rating on the company's stock. And "margins will need to improve over the next several quarters, or the company could face a cash crunch."

Gurda's firm seeks to do business with the companies it covers. It makes a market in LifePoint's securities.