The Ensign Group was the first of the operating companies to report fourth quarter earnings, and the company took a stumble. Earnings were significantly below estimates because of some difficulties transitioning acquisitions, and were also impacted by labor costs and increasing healthcare costs. As a result, management lowered its guidance for 2017 for both revenues and earnings. In addition, occupancy was lower at 74.6% and same-facility occupancy was down nearly 150 basis points year over year. Occupancy at Ensign has historically been lower than its peers because it acquires so many underperforming properties with low occupancy rates that it expects to turn around.
We have often referred to Ensign as the Eveready battery, which kept on going and going through good and bad times. Perhaps its heavy acquisition pipeline the past two years has finally taken its toll, and the company’s secret sauce may have thinned a bit. It is difficult to tell whether this is a short-term problem, and one that will be fixed by the end of the year, or whether it will result in a slowdown in acquisitions as they may need more time to digest and turn around their most recent deals. The share price dropped by as much as 16% during the day, but recovered some of that in late trading.
