Capital Senior Living’s (NYSE: CSU) share price tumbled more than 18% Wednesday, after the provider posted an occupancy decline in the first quarter of the year.
On Tuesday evening, Capital Senior Living announced its Q1 earnings, prompting market-watchers with brokerage and investment firm Stifel to downgrade the stock’s rating from hold to sell. Specifically, the analysts thought CSU’s first-quarter earnings cast doubt on whether the provider will be able to achieve its full-year earnings guidance, which assumes an occupancy gain of 40 to 60 basis points in 2018.
Capital Senior Living saw a record-setting level of move-ins during the first quarter of this year—14% more than the same period in 2017—but that wasn’t enough to prevent occupancy from falling 130 basis points, year-over-year. For the quarter, occupancy clocked in at 86.1%.
“We believe, given the first quarter miss compared to our expectations, coupled with our expectation of persistent industry headwinds that will continue to pressure occupancy, and an extended flu season that will continue to impact second quarter, CSU will be hard pressed to achieve its guidance,” Stifel wrote in its note to investors.
Stifel also pointed out that two of Capital Senior Living’s peers—the real estate investment trusts (REITs) Welltower (NYSE: WELL) and Ventas (NYSE: VTR)—reported similarly large drops in occupancy for their senior housing operating portfolios (SHOP) for the first quarter of the year.
“We can’t see CSU outpacing its peers by such a large extent, so don’t anticipate full occupancy recovery in our CSU model by the end of 2018,” Stifel’s note continued.
But Capital Senior Living CEO Larry Cohen sees it differently, and reaffirmed some of what he said during the company’s first-quarter earnings call when reached by Senior Housing News on Wednesday. Specifically, Cohen said the operator is doing better, not worse, than it originally anticipated.
“I thought we were very clear on the call yesterday that we feel very confident in our projections,” Cohen told SHN. “We ended up with less of [an occupancy] loss than we projected. Our forecast for the quarter was 1 to 2 cents lower than the actual results in the quarter.”
Cohen touted several initiatives during the company’s earnings call Tuesday, including its ongoing efforts to standardize its operating model and pilot an Accountable Care Organization (ACO) relationship with a major hospital system in Texas. Looking ahead, the company expects occupancy to stabilize in the second quarter of this year, then trend upward in the third and fourth quarter.
The recent winter’s deadly flu season and harsh weather also drove up attrition at Capital Senior Living’s 129 communities, he told SHN.
“Had attrition been at the average of the prior three years, we would have had a net gain of 15 units in the first quarter, which would have been probably the first time we can remember in a long time that we had a gain,” Cohen said. “What is important to remember in our projections is, it’s a combination of multiple factors that drive the increases in our financial metrics.”
Written by Tim Regan
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