Company Description

HealthSouth is a leading provider of outpatient surgery and rehabilitative services. The company operates through a network of inpatient and outpatient facilities across the U.S. As of Jun 30 HealthSouth has 93 inpatient rehabilitation hospitals, 6 long-term acute care hospitals, and 59 outpatient satellites. The company is head quartered in Birmingham, Alabama, has 16,000 employees, and a market cap of $1.7 billion.

Fantasctic Second-Quarter Results

On Aug 5 HealthSouth reported second-quarter income from continuing operations of $47.2 million, compared to just $4.7 million in the same period last year. The company said an increase in discharges and quarterly revenue were the main drivers. Discharges are up 5.6%, year over year.

Earnings per share were 17 cents, almost 3 times higher than analyst estimates, which averaged 6 cents. This is the first earnings surprise in the past 4 quarters and was good enough for the HealthSouth to raise its full-year guidance.

Bullish Guidance

The company issued and sold 8.8 million shares for approximately $150 million, which will be used to pay down debt, lowering interest expense. Consequently, HealthSouth increased its forecast for full-year 2008 EPS to between 50 and 55 cents, up from between 30 and 38 cents.

Analysts have also increased estimates for full-year 2009 to 74 cents per share, up from 67 cents. The higher estimates would yield a 51% year-over-year increase.

Expanding in Texas

HealthSouth has acquired 2 new facilities since its Aug 5 earnings announcement. The company finalized the purchase of a 30-bed facility in Arlington, Texas, in addition to a 38-bed hospital in Midland, Texas. The company now operates 14 locations in Texas.

The Chart

Shares of HLS pressed through a level of resistance just above $17, which is now established as a level of support. The stock is trading in a bullish trend since last bouncing off of that support level. Take a look at the chart below.