Acadia Healthcare (ACHC) Up 0.9% Since Last Earnings Report: Can It Continue?

It’s been about a month since Acadia Healthcare’s (ACHC) last earnings report. Shares rose about 0.9% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Acadia Healthcare headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

Acadia Healthcare’s Q1 results soared, revenues increased y/y

Acadia Healthcare reported first-quarter adjusted earnings of 84 cents per share, which beat the Zacks Consensus Estimate by 5%. The financial result increased by 12% year on year.

Total revenues of $768.1 million increased 9.1% year-over-year. However, the upper limit was 1.2% below the consensus.

Improved patient days contributed to quarterly earnings, while continued demand for behavioral health services and impressive growth initiatives are other factors supporting the company’s growth. This was partially offset by a decline in admissions, which remains the most important driver of healthcare operator revenues. Additionally, increased spending levels resulting from higher salaries and benefits have also worsened the situation.

Operations in the first quarter

Same-property revenues were $756.3 million, up 9.2% year-over-year, but missed the Zacks Consensus Estimate and our consensus estimate of $766 million. Year-over-year growth was driven by a 6.9% increase in revenue per patient day and a 2.2% increase in patient days. However, admissions decreased by 1.7% year-on-year. Average length of stay increased by 4% year over year, which was more than our estimated increase of 2.6%.

Facility-wide, patient days increased by 1.8% and admissions decreased by 1.7% year-over-year. Revenue per patient day increased 7.1% year-over-year, which exceeded our growth forecast of 4.6%. Average length of stay increased by 3.6% year-over-year, which was more than our estimated increase of 2.3%.

Adjusted EBITDA of $173.9 million increased 14.9% year over year and exceeded our estimate of $171 million. Adjusted EBITDA margin increased 110 basis points year-over-year to 22.6%.

Total costs of $669.2 million increased 8.2% year-over-year due to higher salaries and benefits, professional fees, other operating expenses and interest expense. However, this figure was lower than our estimate of USD 674.1 million.

Financial update (as of March 31, 2024)

Acadia Healthcare ended the first quarter with cash and cash equivalents of $77.3 million, a decline of 22.8% compared to the level at the end of 2023. At the end of the quarter, the company had a remaining capacity of 371.5 million USD under a revolving credit facility worth USD 600 million.

Total assets of $5.5 billion increased 3% from the end-2023 value.

Long-term debt was $1.8 billion, a 33.6% increase from December 31, 2023. Current long-term debt was $61.5 million.

Total equity of $2.9 billion increased 3% from year-end 2023 levels. At the end of the quarter, the net leverage ratio was approximately 2.6X.

Net cash provided by operating activities was $321.3 million compared to net cash generated from operating activities of $44.4 million in the prior-year quarter.

Business update

During the first quarter, Acadia Healthcare added 27 beds to its existing facilities. One specialized de novo facility called Sabal Palms Recovery Center in Florida was also inaugurated. The company added 15 outpatient programs. Additionally, in February 2024, it finalized the purchase of Turning Point Centers. In March 2024, it also purchased three comprehensive treatment centers in North Carolina.

Acadia Healthcare also began construction on two joint venture hospitals, one in partnership with Orlando Health in Florida and the other in alliance with Tufts Medicine throughout Massachusetts.

Repetition of guidelines for 2024

Revenue is expected to be between $3.18 billion and $3.25 billion. Adjusted EBITDA is estimated to be in the range of $730 million to $770 million.

2024 adjusted earnings per share (EPS) is projected to be in the range of $3.40 to $3.70, with the midpoint representing an increase of 3.2% from the 2023 figure.

Interest costs are estimated at $110-120 million. Depreciation costs are expected to be between $150 million and $160 million. The tax rate is expected to be 24.5-25.5%. Stock compensation expenses are expected to be between $40 million and $45 million.

Forecasted operating cash flow for 2024 will be USD 525-575 million. Capital expenditure for the expansion is expected to range from USD 425 million to USD 475 million. Maintenance and IT capital expenditures are expected to be between $90 million and $110 million.

Management estimates that in 2024, more than 400 beds will be added to existing facilities. This year, it is planned to open a maximum of 14 CTC centers.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

Due to these changes, the consensus estimate moved -6.65%.

VGM results

Currently, Acadia Healthcare has a Poor Growth Rating of F, which indicates the same growth momentum score. However, the stock is rated C for value, putting it in the middle 20% for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Acadia Healthcare carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Acadia Healthcare is part of the Zacks Medical – Hospital industry. Over the past month, shares of the same industry Universal Health Services (UHS) have gained 9.4%. More than a month ago, the company published its results for the quarter ended March 2024.

In the most recent quarter, Universal Health Services reported revenue of $3.84 billion, representing a year-over-year change of +10.9%. EPS of $3.70 in the same period compared to $2.34 a year ago.

Universal Health Services is expected to report earnings per share of $3.26 for the current quarter, which would represent a year-over-year change of +28.9%. Over the past 30 days, the Zacks Consensus Estimate has moved +0.2%.

The overall direction and magnitude of estimate revisions translates into a Zacks Rank #3 (Hold) for Universal Health Services. The stock also has a VGM Rating of A.

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