Community Health Systems has a chance to renew confidence among investors Tuesday as it reports quarterly earnings. But analysts are increasingly bracing for a failure of the Franklin-based hospital chain, one of the region's big employers.
The business term of art is whether a company remains a "going concern," meaning it can avoid closing up shop for the next year or so.
"That question on 'going concern' has come up more and more over the last few weeks," says Brian Tanquilut, a stock analyst with Jefferies & Co. who specializes in Nashville's for-profit hospital industry.
He says Community Health Systems has stabilized somewhat in the past year as it sold off dozens of hospitals to pay down a mountain of debt. But it hasn't reversed its losses and started to make money again.
Increasingly, investors have doubts CHS will be able to come up with its next big debt payment, due in 2021.
"If you think about it, it's somewhat like a person who has income coming in, they're covering their expenses today, but they're sitting on a ton of credit card debt," Tanquilut says.
In May, a portfolio manager at Firefly Value Partners announced taking a short position on CHS, according to Reuters, essentially a bet that the company would go bankrupt in the next few years.
The sinking confidence among investors has resulted in a share price that's dropped to around $2 — its lowest point ever.
A CHS spokesperson declined to comment, citing securities law requiring a quiet period leading up to earnings announcements.