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What: Shares of U.S. hospital operator Community Health Systems (NYSE: CYH ) surged 16% after the company reported better-than-expected fourth-quarter results.
So what: The nation's second-largest hospital operator reported a profit of $0.85 on net operating revenue of $3.4 billion. This compares to Wall Street's consensus of a $0.83 profit and $3.54 billion in revenue. Community Health also forecast that earnings in 2012 would be in the range of $3.45 to $3.70 versus the $3.58 consensus. Overall, net income declined in the fourth quarter over the year-ago period since the company took a charge for retiring debt early.
Now what: I'm not too overly excited about these results. Community Health did beat by $0.02 on the top line and hit the median point of analysts' 2012 guidance, but the main reason profits are holding up is because of extensive cost-cutting. Without question, the company is cheap based on a forward P/E of just 6, but you're paying for that cheapness with low-to-mid single-digit revenue growth. There's also the concern that spending cuts from the federal budget could trickle down to U.S. hospitals. There are too many uncertainties for me to want to buy the stock here, even at its reduced price point.
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