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Columbia/HCA stock revives
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March 6, 1998: 2:28 p.m. ET
Troubled hospital operator boosts market morale on earnings prognosis
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NEW YORK (CNNfn) - Shares of Columbia/HCA Healthcare Corp. added nearly 11.4 percent Friday after the embattled hospital operator said it expected after-expense earnings from continuing operations in its first fiscal quarter in the range of 30 to 35 cents per diluted share.
The estimates were half the 66-cent earnings per share posted in the year-ago period. Yet they offered an instant morale boost to queasy investors who have shied away from Columbia (COL) in recent months as government investigators widened their probe of the company's billing practices and acquisition methods.
The heightened scrutiny played a role in Columbia's decision late last year to halt its expansion ambitions, and instead realign its operations by selling its home care unit and spinning off about one-third of its nationwide network of 340 hospitals.
Columbia's fourth fiscal quarter, which ended Dec. 31, was dismal: the company posted a net loss of $1.29 billion, or $2.01 per diluted share. The losses included about $889 million dollars in charges associated with asset write-offs and extraordinary expenses. The loss from continuing operations was 63 cents a share.
The Wall Street consensus estimate for Columbia in the fiscal first quarter was for 15 cents a share. When the dire predictions failed to materialize Friday, investors reacted with gusto, snatching up the company's stock and driving its stock price up 3 points, to 29-3/8.
"These results are better than what the average analyst was looking for," said Kemp Dolliver, an analyst with Cowen & Co. "Some of the downside risk here has been mitigated."
Normally, investors zero in on year-to-year quarterly results in determining a company's financial health. But because of the acute nature of some of Columbia's problems, Dolliver said, investors were simply looking for any indication that the company had a grip on its balance sheet.
"The market had given up on year over year comparisons, and was more concerned with sequential progress particularly," he said.
Columbia put its earnings after accounting for restructuring, investigation costs, discontinued operations, and asset impairment, at 25 to 30 cents a share.
Columbia depicted its downturn as "seasonal in nature", noting that "there are often material differences between quarterly results, including earnings per share and operating margins."
Thomas Frist, Columbia's chairman and chief executive officer, expressed confidence that Columbia was beginning to bounce back. "We have begun to experience some of the benefits from the reorganization and restructuring plans which we initiated late last year," he said.
In a statement, Columbia said it was going ahead with previously announced plans to seek shareholder approval for the tax-free spinoff of about 100 hospitals in the company's America, Atlantic and Pacific groups.
The company said it would file a ruling request on the sale with the Internal Revenue Service in March or April 1998. Columbia directors also announced that Columbia would pay a regular quarterly dividend of 2 cents a share, payable June 1, 1998 to stockholders of record May 1.
Many of the hospitals that Columbia is looking to spin off were acquired in its $3.45 billion purchase of HealthTrust Inc. three years ago, people familiar with the deal said.
Columbia shares traded Friday afternoon on volume of just over 8,026,000 shares -- well up from their average of about 1.9 million shares.
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Columbia/HCA
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