What happened
Shares of Enhabit Inc. (EHAB 1.62%) were down more than 27% as of Tuesday's close, and the stock hit a 52-week low of $8.31. The healthcare company, in an Oct. 2 filing with the Securities and Exchange Commission (SEC), received a temporary waiver for a potential covenant breach with Wells Fargo and its other lenders. The stock is down more than 34% so far this year.
So what
Enhabit is a leading provider of home-health and hospice services, and operates 255 home-health locations and 108 hospice locations in 34 states. The company has been struggling with several issues. In August, it said that in line with its Tax Matters Agreement with Encompass Health Corporation, Enhabit's board was looking at various options, including a sale of the company, a merger, or some other transaction.
The waiver indicates that Enhabit may be ready to release lower-than-expected earnings in the third quarter next month. Its covenant requires a maximum net leverage of 5.25 times, so the company's net debt could have grown or its earnings before interest, taxes, depreciation, and amortization (EBITDA) may be down as well.
Now what
In Q2, the company reported revenue of $213.8 million, down 2.1% year over year, and a net loss of $74.1 million compared to net income of $20.1 million in Q2 2022. Some of the issues that the company is facing are affecting others in the industry, such as higher staffing costs, staffing shortages, and lower numbers for net-service income and home-health admissions. The news regarding the waiver shows that the company's turnaround efforts haven't really taken hold yet.