Will Investors Miss Out On This Stock Because of a “60 Minutes” Story?

http://www.bluechip-stocks.com/penny-stocks/will-investors-miss-out-on-this-stockbecause-of-a-60-minutes-story Will Investors Miss Out On This Stock Because of a “60 Minutes” Story?

While the U.S. healthcare reform package has been divisive, President Obama said it would be carried out in spite of what was popular. Starting in 2014, the law will offer those 30 million Americans without healthcare the option of an affordable plan.

And, that could benefit investors interested in U.S. healthcare stocks. With 30 million Americans becoming eligible for healthcare, there is the potential for new patients coming into the system, which could in turn drive demand for certain procedures; benefiting the hospital sector.

Health Management Associates, Inc. (NYSE/HMA) operates a network of some 70 hospitals and more than 460 clinics in 15 states, mainly in rural communities in the South. Combined, the facilities have about 10,500 licensed beds. Health Management’s hospitals provide general medical and surgical care, along with outpatient and emergency room services, and specialty care in such areas as cancer care and obstetrics. The organization also operates an increasing number of outpatient surgery centers.

On October 22, the company announced that third-quarter net revenue was up 18.1% year-overyear at $1.44 billion. Net income slipped 5.0% to $41.3 million, or $0.16 per share. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 26.9% to $236.4 million. (Source: Health Management Associates press release, “Health Management Announces 3rd Quarter 2012 Results,” October 22, 2012.)

Year-to-date revenue was up 18.8% at $4.3 billion; net income for the period came in at $115.9 million, or $0.45 per share. Adjusted EBITDA was up 17.7% at $709.2 million.

“Through the efforts of our more than 45,000 associates and 10,000 physicians, we continued to deliver consistent quality performance and EBITDA growth in the third quarter, despite a very challenging and unpredictable economy,” said Gary D. Newsome, President and CEO. Adding, “This culture and track record of solid operating performance is also attracting a significant number of hospitals and hospital systems that are seeking a strategic partner capable of investing the necessary capital to enhance and expand services, and provide the operating expertise to leverage future opportunities.”

Chart courtesy of www.StockCharts.com

Health Management’s share price has been in an uptrend since bottoming out in early June.

There was a golden crossover in mid-August when the 50-day moving average crossed the 200day moving average, a bullish indicator. During the following month, the company’s share price increased 24.2%, climbing from $7.00 to $8.70. It then retraced back to the 200-day moving average in late October, but failed to break below, suggesting strong support at that level. After rebounding higher, the share price again retraced to the 200-day moving average in early December. Over the last two weeks, Health Management’s share price has been climbing higher.

Since mid-September, the company’s share price has been consolidating, with narrowing price swings, and could potentially break out to the upside on strong fundamentals and speculation.

In early December, Health Management’s share price slipped after a negative story about the company appeared on the December 2 airing of “60 Minutes.” The story featured a number of former employees who claimed they felt pressured to admit patients to increase revenues.

In response to the story, Health Management noted that “60 Minutes” failed to identify a single patient who had been inappropriately admitted from any of the company’s emergency rooms, including by the physicians interviewed. (Source: Health Management press release, “Management Associates Issues Statement in Response to Inaccurate ’60 Minutes’ Report,” December 3, 2012.)

Nor did “60 Minutes” dispute the admissions data it was provided by Health Management demonstrating that admissions rates from the company’s emergency rooms were in-line with national norms.

While knee-jerk investors sold their positions in Health Management, analysts are staying put. In the end, investors should consider Health Managements’ fundamentals, profitability, revenue growth, and outlook before dumping shares after a “60 Minutes” story.

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