Why Is R1 RCM Stock Down 40% Today?
Some healthcare market investors are probably feeling ill today, as financial traders are dumping R1 RCM (NASDAQ:RCM) stock like there’s no tomorrow. What are they reacting to? For one, R1 RCM revealed a CEO succession plan today. The company also disclosed its third-quarter results, which included some less-than-ideal data points.
Headquartered in Utah, R1 RCM provides health information services for hospitals and other healthcare service systems. Without a doubt, the company has had to deal with high inflation and tight economic conditions in 2022.
So, this is a challenging time to implement a leadership change. That’s exactly what R1 RCM is doing, though, as CEO Joseph Flanagan gets ready to vacate his position. The board of directors has appointed company President Lee Rivas to succeed Flanagan as CEO starting Jan. 1, 2023.
Current COO John Sparby will succeed Rivas as President, however. So, this isn’t a completely jarring shakeup. Rivas and Sparby are already quite familiar with the company.
What’s Happening With RCM Stock?
That said, these leadership changes aren’t the only notable news items today. RCM stock is now plunging more than 40%. Clearly, there must be a reason for the reaction.
Actually, there are multiple reasons — and they aren’t likely related to the CEO succession. Specifically, R1 RCM released its Q3 2022 financial results today. The company appears to have swung a net loss for the period.
More specifically, R1 RCM went from GAAP-measured net income of $17 million in the year-earlier quarter to a $29.5 million net loss. That’s a drastic difference, so it’s understandable why some stock traders are trimming their positions.
Yet, today’s price action is indicating some panic-selling, not just position trimming. Perhaps traders are also reacting to R1 RCM’s revenue report for Q3. The company announced $496 million in quarterly revenue, a result that missed Wall Street’s forecast by around 5%.
This top-line miss isn’t drastic, but it’s certainly not encouraging to see R1 RCM swing from net income to a net loss. Whether today’s sharp selloff in RCM stock is an overreaction — and possibly even a buying opportunity — remains to be seen.
On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.