December proved a cool month for some publicly traded healthcare providers. Analysts were generally bearish on the prospects of companies like Triad Hospitals and Tenet Health, thanks to declining margins, reimbursement uncertainties and debt.
Prudential Financial was just one of several to downgrade Triad Hospital. In Dec. 11, 2006 research note, analyst David Shove published a research note that moved Triad into the "underweight" category. Shove cited declining EBITDA margins and slow development of new facilities as the basis for his call.
Bear Stearns was a little more charitable, downgrading Triad from outperform to peer perform.
Overall, Triad was trading close to its 52-week high of 45.67 late last week.
It was a quieter month for Tenet, which spent much of 2006 selling seven of the 13 hospitals it planned to shed. According to a company press release, discussions and negotiations with potential bidders for each of the remaining six hospitals are ongoing.
Tenet stock was trading at 7.10, about halfway between the year's highest and lowest values.
Health Management Associates, which owns and operates rural healthcare facilities, enjoyed a small bounce in December, as its share price rose about five percent in the last weeks of 2006. Investors were optimistic that the company's fortunes were better predicted by a 3rd quarter increase in revenues than by its 15 percent drop in profits - due mostly to one-time charges.
Other healthcare providers such as LifePoint and Community Health Systems experienced very little change in value during the last quarter of the year, as earnings were generally in line or ahead of analysts' estimates.
Overall, 2007 could find healthcare stocks in the rise. In the Dec. 25, 2006 issue of Barron's, for instance, experts said investing in healthcare would be a safe bet. The Barron's article shrugged off fears about Democratic legislation and speculated that even in a weak economy, healthcare is well-positioned to generate revenues.