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Why Oak Street Health Stock Is Sinking Today

By Keith Speights – Aug 10, 2021 at 11:29AM

Key Points

  • Oak Street Health beat analysts' revenue estimates in Q2 but missed on the bottom line.
  • The company's medical costs were higher than expected in part due to COVID-19 hospitalizations.
  • Oak Street Health thinks the higher costs will only be temporary and increased its full-year revenue guidance.

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The healthcare provider fell short of Wall Street's Q2 earnings expectations.

What happened

Shares of Oak Street Health (OSH 14.63%) were sinking 17.4% as of 11:18 a.m. EDT on Tuesday. The decline came after the primary care center operator reported its second-quarter results before the market opened.

So what

Oak Street Health announced Q2 revenue of $353.1 million, a 65% year-over-year jump. This result also topped the consensus revenue estimate of $318 million.

A physician sitting across from two people.

Image source: Getty Images.

However, the company posted a Q2 net loss of $100.3 million, or $0.44 per share. This was significantly wider than the net loss of $26.8 million in the prior-year period and was worse than the average analysts' estimate of a net loss of $0.34 per share. 

CEO Mike Pykosz said that Oak Street Health had higher medical costs in the second quarter. He cited three main factors behind these increased costs: COVID-19 hospitalizations, higher non-acute utilization, and medical costs for new patients that were greater than historical levels.

Investors probably shouldn't make too much of the worse-than-expected bottom line, though. Pykosz stated that Oak Street Health thinks the higher medical costs will only be a temporary issue. If he's right, the decline for the healthcare stock could be temporary as well.

Now what

Oak Street Health plans to add between 46 and 48 new centers for 2021. That's more the company's previous goal of adding 38 to 42 centers. The company also boosted its full-year revenue guidance to between $1.37 billion and $1.4 billion, reflecting a 5% increase at the midpoint of the range.

Keith Speights 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.

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Stocks Mentioned

Oak Street Health, Inc. Stock Quote
Oak Street Health, Inc.
OSH
$21.62 (14.63%) $2.76

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