Recent initial public offering Ardent Health Partners is Tuesday's IBD Stock Of The Day. The hospital operator IPO stock joins a groupwide ascent amid strong health care spending and easing wage pressures. ARDT, which came public in July, is flashing a buying opportunity.
Other hospital stocks have already broken out and climbed out of buy range. Among them: HCA Healthcare, Tenet Healthcare, Universal Health and Community Health Systems. So ARDT is worth watching as an opportunity to capitalize on a hot industry group.
The Medical-Hospitals industry group ranks No. 10 out of 197 by IBD based on stock-price performance and momentum.
Ardent Q2 Earnings
On Aug. 14, Ardent reported its first earnings as a public company. Earnings per share rose 31% to 34 cents on 7.5% revenue growth to $1.47 billion. Ardent issued a full-year outlook indicating revenue growth will range from 6.3% to 9.1%, with EPS of $1.23-$1.37, up 186%-219%.
"Fundamentally, we continue to see broad-based demand for healthcare across both inpatient and outpatient settings, while systemic labor cost pressures continue to abate and normalize," CEO Marty Bonick said in the earnings statement.
Adjusted inpatient and outpatient admissions rose 3.4%, while revenue per patient rose 4.1%. Profit-margin expansion reflected "service-line optimization," partly involving a shift away from lower-margin surgical procedures.
Bonick added that Ardent has $832 million in available liquidity after a boost from the IPO, "giving us ample capital resources to pursue acquisitions.
Ardent's Joint-Venture Model
Citi initiated coverage on Ardent with a buy rating and 21 price target, touting its "differentiated" joint-venture model. Ardent partners with not-for-profit health systems, including academic medical centers.
In its IPO prospectus, Ardent explained that it benefits "from our partners' brand and scale, while leveraging our deep institutional knowledge and experience structuring and operationalizing JV partnerships." The upshot: "We have been able to improve patient access in the community, expand our footprint, increase our market share, and earn favorable economics."
ARDT IPO
Despite the positive backdrop for hospitals, Ardent scaled back its IPO to 12 million shares priced at $16. That was down from an earlier target of 14.3 million shares priced at $20-$22.
Ardent began trading on July 18, rising as high as 18.16 on Aug. 1. Keep in mind that IPO bases can be shorter and have a little more leeway than other stocks.
Ardent jumped 6.05% to 18.58 in Tuesday stock market action, clearing a 17.96 handle buy point within a compact IPO base.
A trendline sloping down from the Aug. 1 high offered a slightly early entry around 17.90.
The relative strength line hit a record high on Ardent's breakout, a bullish sign.
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