Please ensure Javascript is enabled for purposes of website accessibility

Why Brookdale Senior Living Is Soaring Today

By Brian Feroldi - Feb 19, 2020 at 2:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares jumped after the nursing home operator issued upbeat guidance, but is the bullish move warranted?

What happened

Following a better-than-expected earnings report, shares of Brookdale Senior Living (BKD -8.47%), an operator of nursing homes, rose 21% as of 1:46 p.m. EST on Wednesday. 

So what

Here are the headline numbers from the quarter:

  • Revenue was down 8% to $987 million. The drop is a result of Brookdale choosing to sell properties to strengthen its balance sheet.
  • On a same-community basis, revenue grew 2.1%.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 15% to $100 million.
  • Operating income more than doubled to $88.1 million.
  • Adjusted free cash flow was just $500,000.
  • Net loss was $91.4 million, or $0.49 per share. That was more than double the $0.23 net loss per share that analysts were expecting.
  • Management repurchased $6 million in common stock during the quarter.
Nurse holding the hand of a smiling senior citizen who is lying in bed

Image source: Getty Images.

In 2020, management expects to generate $510 million to $540 million in adjusted EBITDA, and adjusted free cash flow is expected to be $70 million to $90 million. These numbers compare favorably to the $401 million in adjusted EBITDA and negative $76 million in adjusted free cash flow that the company reported for 2019. However, both of the 2020 figures will be aided by a $100 million management termination fee that it received from Healthpeak in January, so the outlook is not as strong as it might seem.

While the quarterly results didn't look too great, traders appear to be reacting favorably to the upbeat guidance.

Now what

In theory, the gradual aging of the population should put the wind at the back of healthcare companies like Brookdale. However, the reality is that running senior living facilities is both hard and expensive, which puts the company in a difficult position. That's why my plan is to avoid Brookdale's stock for the foreseeable future, and focus my time and capital on companies with better growth opportunities.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Brookdale Senior Living Inc. Stock Quote
Brookdale Senior Living Inc.
$4.54 (-8.47%) $0.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.