Ahead of the Bell: Hospital operators started at 'Sell'

NEW YORK—A Citi Investment Research analyst began covering hospital operator stocks with "Sell" ratings Tuesday, citing declining patient commercial admissions and growing debt.

Citi's Gary Taylor set his lowest rating on shares of Tenet Healthcare Corp., MedCath Corp., Universal Health Services Inc., Community Health Systems Inc., Health Management Associates Inc. and Lifepoint Hospitals Inc. He expects each to lose ground over the next year.

Taylor said economic conditions in the U.S. are making business more difficult for the companies.

Also on Tuesday, Deutsche Bank analyst Darren Lehrich downgraded Tenet shares to "Hold" from "Buy," saying the stock is close to a fair price. He raised his price target to $7.25 per share from $6.

Taylor said Tenet may have liquidity problems if it can't increase its profit margins. He said he doubts the company will succeed in its goal of raising $1 billion in pretax profits. He set a price target of $4 per share.

Tenet stock finished at $6.70 Monday. It has advanced about 32 percent since the start of the year.