This Healthcare Stock Plunges 16%. Why Its Legal Costs Are Set to Double.

Psychiatric hospital operator Arcadia Healthcare cut its full-year earnings guidance for the second time in a month on Tuesday. (Dreamstime)

Key Points

• Acadia Healthcare’s stock plummeted 16% due to a cut in its earnings outlook.
• The company anticipates $116 million in legal expenses for the year, up from $54 million in 2024.
• Acadia revised its adjusted earnings forecast to $1.94-$2.04 per share, down from the previous $2.35-$2.45 per share.

Acadia Healthcare stock was slumping on Wednesday, after the operator of psychiatric hospitals cut its earnings outlook due to ballooning legal costs.

Shares plummeted 16% to $13.81 in early trading. They were down 31% at one point before the open, which would have marked the largest percentage decrease since November 2000, according to Dow Jones Market Data. The S&P 500 was 0.1% lower.

The selloff came after Acadia said it was expecting professional and general liability expenses of $116 million this year, up from $54 million in 2024. It blamed a surge in patient-related litigation for the jump in legal costs.

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As a result, Acadia now expects adjusted earnings of $1.94 to $2.04 a share for the year, having previously forecast $2.35 to $2.45 a share.

“The lack of earnings per share visibility will remain a valuation overhang on the stock in the near-term,” Mizuho analyst Ann Hynes, who rates the stock at Neutral with a price target of $22, wrote in a research note.

It’s the second time in less than a month that Acadia has lowered its full-year earnings outlook. The company also cut its guidance on Nov. 5, when it reported better-than-expected third-quarter results.

Write to George Glover at george.glover@dowjones.com