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Community Health Systems: Reading through the multiples
The resulting best EV/best EBITDA declined only slightly, indicating that analyst estimates about future company earnings remain strong. Despite this performance, the company’s share price began to drop on November 7, 2014.
The company acquires hospitals to create regional networks, especially in states where more of the population is uninsured. By positioning itself to be the network provider in under-penetrated markets, the company can earn higher revenues.
Community Health Systems reached an agreement with the Department of Justice to resolve a False Claims Act case in New Mexico. The company created a reserve fund of $77 million to resolve this matter.
With the implementation of Obamacare reforms, the healthcare industry is now developing new methods of providing quality care to patients. The variety of physician practices affiliated with Community Health Systems is giving more patients access to preventive health services.
Community Health Systems acquired facilities in Mississippi and South Carolina in 2014. These acquisitions are expected to earn up to $40 million revenue each for the company, annually.
Community Health Systems acquires two to four hospitals each year as a part of its growth strategy. Reducing duplicate functions at the corporate level reduces overhead salary costs.
Historically, most physician recruitment occurs in the third quarter. Around 50% of physicians recruited provide primary care. The remainder are specialists.
Community Health Systems (CYH) operates mainly in non-urban and select urban markets in the US. Florida has the highest number of company hospitals and also the highest share of company revenues.
Community Health Systems’ salary expenses as a percentage of net operating revenues decreased to 45.7% in the third quarter of 2014, from 47.7% on a year-over-year basis
Community Health Systems is experiencing a shift in revenue streams. Outpatient services totaled 55.8% of total revenue earned in the third quarter of 2014.
Community Health Systems (CYH) owns, operates, or leases 207 hospitals across 29 states. It currently controls more hospitals in the US than any other operator.
Arch Coal has over 70% more debt on its books than revenues expected in 2014. That’s a lot when you consider that most coal producers aren’t making money.
Barring the idling of the Cumberland River Complex, the quarter was uneventful. Arch Coal underperformed compared to most estimates—except for revenue.
Arch Coal expects to burn around $200 million in free cash in 2014, meaning that 4Q 2014 free cash flows may come in around -$80 million.
Arch Coal reported net losses from operations of $97.2 million (46 cents a share) in 3Q 2014—down from 3Q 2013’s $207.8 million net loss (98 cents a share).
Arch Coal (ACI) reported $742.2 million in revenues in 3Q 2014, 6.2% lower than 3Q 2013’s $791.3 million. Appalachian segment revenues saw an uptick.
Management called the bituminous thermal segment “the real star” in the conference call for its 3Q14 earnings. The segment has done well on the cost front.
Arch Coal’s (ACI) western bituminous segment consists of the West Elk mine in Colorado (Western Bituminous) and the Viper mine in Illinois (Illinois basin).
Arch Coal (ACI) generated $389.4 million from its Powder River basin (or PRB) segment in 3Q 2014, down from 3Q 2013’s $420.5 million. The drop in revenues was a result of lower shipments.
Arch Coal runs two surface mines producing thermal coal in the Powder River Basin (or PRB) in Wyoming. Black Thunder is the second-largest coal mine in the US.