What: After updating its financial guidance and announcing a share offering, shares of Adeptus Health (NYSE: ADPT) lost 15.9% of their value at 11:30 a.m. EDT Wednesday.
So what: The company is moving up the timeline for the opening of a new hospital in Houston to this year from early next year and that, plus expected admission growth, has management thinking that full-year systemwide revenue, including revenue from unconsolidated joint ventures, will be between $640 million to $670 million. Management also said it expects to deliver adjusted EPS of at least $2.55 in 2016.
That forecast isn't bad, so it could be that investors are exiting because of the company's second quarter guidance and the company's stock offering.
Adeptus Health expects second quarter 2016 systemwide revenue of $140 million to $145 million and adjusted EPS of between $0.48 to $0.52, but industry watchers consensus EPS estimate is $0.59.
Also, the company is offering 2,750,000 shares of its Class A common stock, of which 1,843,162 shares are to be sold by the Company, and 906,838 shares are to be sold by an affiliate of Sterling Partners. Any proceeds the company receives will be used to buy Adeptus Health LLC from its company directors and executive officers.
Now what: Stock offerings dilute earnings and therefore Wednesday's news isn't bullish. However, investors might not want to worry too much about the company's outlook. After all, Adeptus Health's freestanding emergency rooms continue to benefit from a larger, older, and increasingly insured population.
Nevertheless, this stock still seems a bit pricey to me. Shares are trading at 24 times the company's adjusted earnings guidance and while Adeptus Health is growing, I'd prefer to wait and see where the share price finds its footing, rather than buy Wednesday's drop. After all, there are plenty of other opportunities to consider.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.