Cano Health stock tanked on Friday after the company announced plans to pursue a sale along with disappointing 2Q numbers.
The Miami-based healthcare company reported a quarterly loss of $0.28 per share, far higher than the $0.09 analyst estimate and above the loss of $0.03 per share a year ago.
The firm also missed sales estimates by around 8% with revenue of $766.75 million for the quarter ended June 2023, compared to year-ago revenues of $689.37 million.
Cano announced its intention to assess interest in a company sale or asset sale, amidst its considerable financial challenges, spooking investors and sending its shares plummeting by over 68%.
The decision comes alongside the withdrawal of its 2023 guidance, attributing the move to an inadequate liquidity position to cover operational, investing, and financing needs over the next year.
As a result, Cano expressed doubt about its ability to sustain operations within the next 12 months.
Analysts at UBS noted that the medical cost ratio (MCR) for the recent quarter stood at 103.5%, significantly worse than expected and attributed to a variety of factors including lower Medicare risk adjustment (MRA) payments, adverse prior period development, and increased utilization of outpatient and diabetes drugs. The MCR shortfall also follows a year of reduced MRA revenue, which the company ascribed to data issues, manual processes, and flawed forecasting.
Cano said it plans to counter the financial strain by exiting operations in certain regions, consolidating others, and downsizing its workforce by 17%, which should lead to $50 million in cost savings annually.
Shares of Cano were trading hands at $0.48 on Friday morning.
Contact Angela at angela@proactiveinvestors.com
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