Why Kindred Healthcare, Inc. Jumped Higher Today

By Brian Orelli Markets Fool.com

What happened

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Kindred Healthcare (NYSE: KND) is up 10.5% at 1:11 p.m. EST after announcing its fourth-quarter results and guidance for the years ahead.

So what

This isn't a case where Kindred Healthcare hit a home run with its fourth-quarter results. Revenue decreased 2% year over year in the fourth quarter, and the company's core diluted earnings per share from continuing operations was $0.08, compared to $0.33 in the year-ago quarter.

Image source: Getty Images.

But investors are forward-looking and clearly see brighter days ahead for the company. Management is guiding for revenue of $7.1 billion to $7.3 billion this year; the middle of that bracket is in line with the $7.22 billion Kindred Healthcare booked last year, which isn't bad considering the company has closed some long-term acute carehospitals.

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On the bottom line, management guided for 2017 core diluted EPS from continuing operations of $0.55, with a wide potential range of $0.40 to $0.70. Even at the high end of the range, the company will make less than the $0.76 per share it brought in last year.

Now what

Management also gave 2018 guidance and while the revenue will be lower because the company plans to sell its skilled nursing facilities, the cash can be used to pay down debt, increasing earnings. In 2018, management estimates its core diluted EPS from continuing operations will be approximately $0.80, a substantial step up from this year's guidance.

Long-term investors willing to wait for the turnaround could end up being handsomely rewarded if management can hit its targets.

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Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.