Community Health Systems (NYSE: CYH)
Community Health Systems is having an incredibly rough day in the market today after announcing what it expects to report with regard to third quarter revenue. Today, we’ll talk about the announcement, the reaction we’re seeing in the market, and what we can expect to see moving forward. So, let’s get right to it…
Community Health Systems Announces Q3 Revenue Expectations
Community Health Systems announced today that it is not expecting to meet analyst projections with regard to third quarter revenue. While analysts expected for CYH to produce $5 billion in revenue for the third quarter, the company announced that it is expecting to report $4.846 billion in revenue for the quarter. This announcement comes in sharp contrast to what we are used to seeing out of CYH. Over the past four quarters, the company has beat earnings projections three times and met earnings projections once, with no misses. So, the fact that CYH is likely to miss earnings this time around is a bit of a shock.
How CYH Reacted To The News
As we’ve come to expect anytime there is a negative surprise, we tend to see a negative price reaction in the market. That’s exactly what happened today. In fact, the negative price reaction was far more than what is generally expected in these scenarios. Currently (11:32), CYH is trading at $26.56 per share after a loss of 34.50% so far today.
What We Can Expect To See Moving Forward
One of the first things that investors should keep in mind in times like these is the fact that price movements in the market generally happen through a series of overreactions. Looking at today’s declines side by side with the reason for the declines, it’s clear to see that today’s reaction is just that. Sure, we should see declines on bad news, but a 34+ percent loss is a big loss. The type of loss we would expect to see if clinical trials were stopped mid-phase, if a CEO resigned out of the blue, or something else drastic happened – not if revenue is expected to come in slightly lower than analyst projections. With that said, I’m expecting to see a strong recovery tomorrow, followed by relatively flat movement.
What Do You Think?
Where do you think CYH is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Nation of Change]