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Why Oak Street Health Stock Is Plunging Today

By Keith Speights – Nov 9, 2021 at 11:37AM

Key Points

  • Oak Street Health narrowly missed the consensus earnings estimate in Q3.
  • The bigger story, though, was that the U.S. Department of Justice is investigating the company.
  • Oak Street Health is cooperating with the DOJ investigation.

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The company provided some bad news with its Q3 update.

What happened

Shares of Oak Street Health (OSH 2.69%) were plunging 19.6% as of 11:22 a.m. EST on Tuesday. The steep decline came after the company provided its third-quarter update following the market close on Monday.

Oak Street Health reported revenue of $388.7 million. This reflected a 78% year-over-year jump and easily topped the average analysts' estimate of $357.5 million. However, the primary care center operator posted a net loss of $109.9 million, or $0.49 per share. This missed the consensus estimate of a loss of $0.47 per share. 

You might wonder why the healthcare stock would fall so heavily on a slight earnings miss. The bigger issue in Oak Street Health's Q3 update was that the company revealed that the U.S. Department of Justice (DOJ) is investigating whether it may have violated the False Claims Act. The DOJ has requested documents and information related to Oak Street providing free transportation to federal healthcare beneficiaries and related to its relationships with third-party marketing agents.

A physician holding a stethoscope up to healthcare icons.

Image source: Getty Images.

So what

It's too early to know what will happen with the DOJ investigation. Oak Street Health's management stated that it will provide all information and documentation requested in the civil investigative demand.

The company acknowledged, though, that regardless of what happens with the investigation, it could have a negative financial impact due to legal costs and the diversion of human resources from other priorities.

Now what

While investors await the outcome of the investigation, there are two more positive things to watch with Oak Street Health. The company was selected as the only primary care group to use the AARP name. It also has a solid growth opportunity with the recent acquisition of virtual specialty care provider RubiconMD. 

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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