After acting as if they were throwing in the towel on Wednesday, the bulls latched onto some encouraging words spoken by European Central Bank President Mario Draghi alluding to a stimulus package aimed at propping up the continent’s struggling economy. By the time the closing bell rang, the S&P 500 was at 2052.51, up 1.66%.
The bullish tide didn’t lift all stocks, however. Valeant Pharmaceuticals Intl. Inc (NYSE:VRX), American Express Company (NYSE:AXP) and Community Health Systems (NYSE:CYH) were all hammered on Thursday, though for understandable reasons. Here’s what happened.
Community Health Systems (CYH)
In what had to be a record-breaking implosion for the stock, Community Health Systems fell a stunning 36% on Thursday after the hospital chain warned that the upcoming Q3 earnings report wouldn’t be as strong as expected by analysts … or even close to it.
Per today’s warning, Community Health Systems now anticipates reporting a profit of 56 cents per share for the prior quarter, versus analyst estimates for earnings of 89 cents per share of CYH. The long explanation of the shortcoming was a combination of higher expenses and lower revenue. The shortened version of the explanation is, the Affordable Care Act has driven all the big-time growth it’s going to drive.
CYH was hardly the only hospital name impacted, though. Concerned that what’s ailing Community Health Systems is also going to crimp results for other hospital names, Tenet Healthcare Corp. (NYSE:THC), Universal Health Services, Inc. (NYSE:UHS), HCA Holdings Inc. (NYSE:HCA) and most other hospital stocks were hit quite hard on Thursday.
Valeant Pharmaceuticals Intl. Inc (VRX)
Just when you think it can’t get any worse for Valeant Pharmaceuticals, it gets worse.
Already down more than 32% since September in the wake of Hillary Clinton’s tweeted vow to reel in outlandish specialty drug prices, VRX fell another 26% over the course of Tuesday and Wednesday after known short-seller Andrew Left (of Citron Research) made an alarmingly cogent bearish case against the stock.
The company refuted and rejected Citron Research’s claims, but after the media had time to process both sides of the argument, Valeant Pharmaceuticals came out a loser again, sending VRX shares south to the tune of 7%.
The clincher may have been the downgrade of VRX by BMO Capital Markets. A long-time bull on the stock, BMO analyst Alex Arfaei lowered his stance on Valeant to a “market perform” after finding merit in some of the questions Left raised.
American Express Company (AXP)
Last, and least, American Express Company saw its stock take a 5% hit today following a disappointing third-quarter earnings report.
All told, American Express earned $1.24 per share on revenue of $8.19 billion last quarter. Analysts were looking for a profit of $1.31 and a top line of $8.32 billion. Last quarter’s figures also fell short of Q3-2014’s comparable numbers of $1.40 per share and revenue of $8.3 billion.
While the results were a letdown, the bulk of the damage American Express Company may have stemmed from a lowered price target on AXP stock. Credit Suisse now deems AXP as only worth $71, down from a prior target of $74; Credit Suisse still has an “underperform” rating on American Express shares.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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