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Why Shares of R1 RCM rose 10% on Tuesday

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What happened

Shares of R1 RCM (NASDAQ: RCM) rose 10% on Tuesday. The stock closed at $7.51 on Monday, then opened on Tuesday at $7.52. It rose to a daily high of $8.31 shortly after 2 p.m. ET before closing at $8.25. The stock has a 52-week low of $6.71 and a 52-week high of $27.86 and is down more than 67% so far this year.

So what

The company, which provides technology-driven revenue cycle management services to healthcare providers, was coming off its 52-week low just a few weeks ago after it issued its third-quarter earnings report. Since then, the company’s stock price has slowly but steadily increased. It’s a sign that the initial drop was an overreaction to the earnings report, which had some positives.

R1 RCM reported third-quarter revenue of $496 million, up 30.6% year over year, but it had a net loss of $29.5 million, compared to net income of $17 million in the same period last year. Much of the loss was due to a nonpayment of a bill by one of R1 RCM’s customers that was having financial difficulties, the company said on its third-quarter earnings call. R1 RCM also said that longer payer turnaround was slowing earnings. The other bit of news that concerned investors was that it downgraded full-year guidance. It said it expected annual revenue now to be between $1.79 billion and $1.8 billion, down from an earlier range of between $1.85 billion and $1.87 billion. It also lowered net income to show a likely loss of between $8 million and $13 million, compared to a net gain of $55 million to $65 million.

Now what

The swing to a net loss for the year is still a worrying thought for investors. The healthcare company does still have a good long-term outlook as its annual revenue has steadily increased and its Cloudmed revenue intelligence platform has continued to grow. R1 RCM completed its $1.1 billion purchase of Cloudmed in June. Demand for the company’s services in a tight labor market is growing as healthcare providers struggle to keep up with billing services.

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Jim Halley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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