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Here's Why Brookdale Senior Living Stock Is Plunging Today

By Matthew Frankel, CFP® – Updated Nov 7, 2017 at 12:13PM

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Disappointing earnings are sending the stock down by double-digits.

What happened

Simply put, Brookdale Senior Living (BKD) reported a pretty ugly quarter that disappointed investors. As of 11:30 a.m. EST on the day of the earnings release, Brookdale's stock had plunged by more than 12%.

The company reported a net loss of $413.9 million for the quarter, significantly wider than the $51.7 million loss from a year ago. Adjusted EBITDA dropped by 30%, and adjusted free cash flow fell by 11%. Senior housing revenue fell by 12.2% year over year, and $5.2 million of hurricane-related expenses were realized by the senior housing portfolio during the quarter.

Nurse assisting senior woman.

Image source: Getty Images.

Perhaps the most important item in the earnings release was Brookdale's 2017 guidance, which the company reduced. Adjusted EBITDA is now expected to be in the $650 to $670 million range, down from the $670 to $710 million range that the company forecast previously, and free cash flow is expected to be $80 to $100 million, a huge difference from the $140 to $170 million called for in the company's second-quarter earnings release.

So what

Brookdale's management pointed out some good aspects of the third quarter, such as the best net move-in/move-out ratio in recent years, and increased occupancy in its properties. However, the company did acknowledge that competition and costs are likely to take their toll going forward.

Brookdale's President and CEO Andy Smith said, "we will continue to experience the impact of intense competition and labor cost pressures through 2018."

Now what

Simply put, the company's $12 million to $13 million impact from hurricanes and worse-than-expected competitive pressures are having a deeper effect on results that the company and analysts had planned on. To make matters worse, the company's comments regarding 2018 don't sound like things will get much better anytime soon.

Matthew Frankel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Brookdale Senior Living Stock Quote
Brookdale Senior Living
$3.34 (%)

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