Why Select Medical Shares Slipped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Select Medical , an operator of specialty hospitals and outpatient rehabilitation centers, dipped as much as 14% after the company reported disappointing first-quarter results and provided an uninspiring full-year outlook.

So what: For the quarter, net operating revenue increased by just shy of 1% to $750 million as net income fell to $82.5 million from $91.6 million in the year-ago period; or $0.25 in EPS on a diluted basis compared to $0.29 in EPS in 2012. Wall Street analysts had forecast a profit of $0.27 per share on revenue of $760.6 million. Furthermore, Select Medical provided full-year guidance that calls for revenue of $2.925 billion to $3.025 billion and EPS of $0.87-$0.94. Expectations currently call for $3 billion in revenue and EPS of $1.01. Select Medical blamed its weak forecast on the effects of sequestration.


Now what: While today's results certainly weren't anything to write home about, Select Medical is getting to a point where I'm beginning to find it attractive. The Patient Protection and Affordable Care Act will help provide an insurance buffer for hospital companies who have been done in by doubtful accounts in the past by requiring everyone carry health insurance by law. In addition, downside pressure on government reimbursements appears mostly dashed by recent recommendations by the Centers for Medicare and Medicaid Services. At less than nine times this year's earnings, I'm certainly thinking Select Medical deserves a closer look.

Craving more input? Start by adding Select Medical to your free and personalized Watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in hospital operators like Select Medical, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report, "3 Stocks That Will Help You Retire Rich," names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article Why Select Medical Shares Slipped originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. 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.

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