Fear of Medicaid Cuts Hits Health Insurer and Hospital Stocks — WSJ

Wall Street Journal

Community Health Systems

By Joseph Walker

A GOP budget plan that requires deep cuts to Medicaid spending battered shares of health insurers and hospitals that do big business in the government funded health program.

Shares of Centene, the biggest manager of state Medicaid programs, fell more than 7% in midday trading. Shares of Molina Healthcare, which derives about 80% of its revenue from Medicaid, fell 7.8%. Another big Medicaid player, Elevance Health, fell about 4%.

Hospital stocks also fell on fears of pressured reimbursement for the Medicaid patients they care for. Community Health Systems fell 9.3% and HCA Healthcare was down 4%.

House Republicans are looking to pass a budget that cuts total government spending by up to $2 trillion over a decade and implement tax cuts of up to $4.5 trillion. Some in the party, including President Trump, have cautioned against cutting the program.

Medicaid is jointly funded by states and the federal government, and provides health insurance to nearly 80 million low-income people.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

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Dj Big Medicaid Cuts Look More Likely. Hospital And Insurer Stocks Are Down. - Barrons.Com

Reuters

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Big Medicaid Cuts Look More Likely. Hospital and Insurer Stocks Are Down. — Barrons.com

Barron's

By Josh Nathan-Kazis

Cuts to the Medicaid program that could amount to hundreds of billions of dollars over the next decade are looking more and more likely after a House of Representatives vote on Tuesday night, and shares of hospital owners and Medicaid-focused insurers were down Wednesday.

Proposed Medicaid cuts have been in the air for months, and uncertainty about the depth of cuts remains even after Tuesday night's vote. The bottom line, however, is that cuts to the program, which provides health coverage to 21% of people in the U.S., do seem to be on their way.

"Many investors will be more nervous today than they were yesterday, before the vote," Raymond James healthcare policy analyst Chris Meekins told Barron's early Wednesday.

The new House budget plan could be bad news for hospital companies like HCA Healthcare and Tenet Healthcare, which serve Medicaid patients, and for the insurers that specialize in Medicaid plans, specifically Molina Healthcare, Centene, and Elevance Health.

Shares of the larger Medicaid-focused insurers were down the most early Wednesday. Centene dropped 5.1%, Molina fell 5.3%, and Elevance was down 2.5%. Among the hospital companies, Tenet was down 2.7%, while HCA was down 4.1%.

After days of fervent dealmaking, House Speaker Mike Johnson (R., La.) on Tuesday corralled nearly every Republican in the chamber — including moderate members who are wary of steep Medicaid cuts — into supporting a resolution that lays out a framework for a federal budget deal.

What the moderates' votes in favor of the resolution mean about the future of the Medicaid cuts is an open question.

"If you want to be long the Medicaid names, you say, well they had to make a deal with moderates not to cut Medicaid, so clearly everything will be fine," says Chris Meekins, a healthcare policy analyst at Raymond James.

On the other hand, Meekins says, cuts outlined in the framework have to come from somewhere.

The resolution demands that the House committee responsible for Medicaid funding propose cuts to reduce the federal budget by $880 billion through 2034. Much of that will need to come from Medicaid.

"The problem is you still have to come up with the cuts, and you have to get the conservative hardliners on board," Meekins said. He expects about $500 billion in Medicaid cuts.

Where in the Medicaid program those cuts come from will determine which stocks they hit hardest.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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Acadia Healthcare to Report Q4 Earnings: Can it Overcome Rising Costs?

Zacks

Behavioral healthcare services provider Acadia Healthcare Company, Inc. ACHC is set to report fourth-quarter 2024 results on Feb. 27, 2025, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at 72 cents per share on revenues of $779.89 million.

See the Zacks Earnings Calendar to stay ahead of market-making news.

The fourth-quarter earnings estimate declined 2 cents per share in the past 60 days. The bottom-line estimation indicates a year-over-year decrease of 15.3%. However, the Zacks Consensus Estimate for quarterly revenues implies year-over-year growth of 5%.

For 2024, the Zacks Consensus Estimate for Acadia Healthcare’s revenues is pegged at $3.16 billion, implying a rise of 7.9% year over year. But the consensus mark for current year EPS is pegged at $3.38, implying a fall of around 1.7% on a year-over-year basis.

Acadia Healthcarebeat the consensus estimate for earnings in each of the last four quarters, with the average surprise being 3.9%. This is depicted in the figure below.

Acadia Healthcare Company, Inc. Price and EPS Surprise

Acadia Healthcare Company, Inc. price-eps-surprise | Acadia Healthcare Company, Inc. Quote

Q4 Earnings Whispers for ACHC

However, our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat, but that is not the case here.

ACHC has an Earnings ESP of -5.44% and a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

What is Shaping ACHC’s Q4 Results?

Both the Zacks Consensus Estimate and our model estimate for Acute Inpatient Psychiatric Facilities’ revenues signal a nearly 6% increase from the year-ago figure of $375.6 million. Also, both the consensus estimate and our model estimate for Residential Treatment Centers’ revenues indicate a 23% jump from the year-ago level of $84.3 million.

The Zacks Consensus Estimate and our model estimate for U.S. same-facility patient days signal 4% year-over-year growth. Both estimates for U.S. same-facility admissions indicate a 3.1% increase from a year ago. Also, we expect average length of stay to have increased 1.3% year over year. The Zacks Consensus Estimate and our model estimate for revenue per patient day imply a 4% year-over-year rise.

While the above-mentioned factors are likely to have boosted Acadia Healthcare’s fourth-quarter revenues, rising expenses are likely to have affected its profit levels, making an earnings beat uncertain. We expect total expenses to have increased more than 6% in the to-be-reported quarter, due to higher salaries, wages and benefits, professional fees and other operating costs. Also, with rising utilization, supply costs are expected to have increased in the fourth quarter.

Moreover, both the Zacks Consensus Estimate and our model estimate for Specialty Treatment Facilities’ revenues signal a nearly 2% decrease from the year-ago figure of $151.3 million. Also, both the consensus estimate and our model estimate for Comprehensive Treatment Centers’ revenues indicate a 1.2% fall from the year-ago figure of $131.6 million.

How Did Other Stocks Perform?

Here are some stocks in the broader Medical space that have already reported earnings for this quarter: HCA Healthcare, Inc. HCA, The Ensign Group, Inc. ENSG and The Cigna Group CI.

HCA Healthcare reported fourth-quarter 2024 adjusted EPS of $6.22, which outpaced the Zacks Consensus Estimate by 4.2%, driven byhigher patient volumes giving rise to an increased number of inpatient surgeries and same-facility emergency room visits. However, this upside was partly offset by elevated salaries and benefits expenses. Additional expenses due to Hurricane Helene and Hurricane Milton also impacted the results.

Ensign reported fourth-quarter 2024 adjusted earnings per share of $1.49, which outpaced the Zacks Consensus Estimate by 1.4%, thanks to improved occupancy rates, higher patient days and higher skilled service revenues. The positives were partly offset by an elevated expense level due to the higher cost of services and rents.

Cigna reported fourth-quarter 2024 adjusted earnings per share of $6.64, which missed the Zacks Consensus Estimate by 15.2%, due to a decline in its overall medical customer base and elevated medical costs. Nevertheless, the downside was partly offset by expanding specialty volumes in the Evernorth Health Services segment and new client wins.

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

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U.S. stocks mixed at close of trade; Dow Jones Industrial Average up 0.37%

Investing.com

Investing.com – U.S. stocks were mixed after the close on Tuesday, as gains in the Healthcare, Basic Materials and Consumer Services sectors led shares higher while losses in the Technology, Oil & Gas and Consumer Goods sectors led shares lower.

At the close in NYSE, the Dow Jones Industrial Average rose 0.37%, while the S&P 500 index fell 0.47%, and the NASDAQ Composite index fell 1.35%.

The best performers of the session on the Dow Jones Industrial Average were Walmart Inc (NYSE:WMT), which rose 4.29% or 4.02 points to trade at 97.69 at the close. Meanwhile, Home Depot Inc (NYSE:HD) added 2.84% or 10.87 points to end at 393.29 and Sherwin-Williams Co (NYSE:SHW) was up 2.66% or 9.16 points to 353.03 in late trade.

The worst performers of the session were NVIDIA Corporation (NASDAQ:NVDA), which fell 2.80% or 3.65 points to trade at 126.63 at the close. Goldman Sachs Group Inc (NYSE:GS) declined 1.79% or 11.23 points to end at 614.91 and International Business Machines (NYSE:IBM) was down 1.57% or 4.12 points to 257.75.

The top performers on the S&P 500 were Solventum Corp (NYSE:SOLV) which rose 9.54% to 83.56, Molina Healthcare Inc (NYSE:MOH) which was up 6.45% to settle at 305.97 and American Tower Corp (NYSE:AMT) which gained 6.12% to close at 203.75.

The worst performers were Sempra Energy (NYSE:SRE) which was down 18.97% to 70.64 in late trade, Super Micro Computer Inc (NASDAQ:SMCI) which lost 11.76% to settle at 45.54 and Tesla Inc (NASDAQ:TSLA) which was down 8.39% to 302.80 at the close.

The top performers on the NASDAQ Composite were Organovo Holdings Inc (NASDAQ:ONVO) which rose 244.17% to 1.27, ReTo Eco-Solutions Inc (NASDAQ:RETO) which was up 83.05% to settle at 1.08 and Venus Concept Inc (NASDAQ:VERO) which gained 76.47% to close at 0.54.

The worst performers were Connexa Sports Technologies Inc (NASDAQ:YYAI) which was down 46.37% to 0.68 in late trade, Transcode Therapeutics Inc (NASDAQ:RNAZ) which lost 36.73% to settle at 4.29 and Aclarion Inc (NASDAQ:ACON) which was down 30.69% to 3.23 at the close.

Rising stocks outnumbered declining ones on the New York Stock Exchange by 1542 to 1251 and 62 ended unchanged; on the Nasdaq Stock Exchange, 2109 fell and 1208 advanced, while 103 ended unchanged.

Shares in Solventum Corp (NYSE:SOLV) rose to all time highs; up 9.54% or 7.28 to 83.56. Shares in Aclarion Inc (NASDAQ:ACON) fell to all time lows; losing 30.69% or 1.43 to 3.23.

The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 2.37% to 19.43 a new 1-month high.

Gold Futures for April delivery was down 1.12% or 33.08 to $2,930.12 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in April fell 2.29% or 1.62 to hit $69.08 a barrel, while the May Brent oil contract fell 2.29% or 1.70 to trade at $72.61 a barrel.

EUR/USD was unchanged 0.45% to 1.05, while USD/JPY fell 0.45% to 149.01.

The US Dollar Index Futures was down 0.31% at 106.18.

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