Kevin Campbell isn’t buying the thesis that Vanguard Health Systems will suffer a lot from its shrunken Arizona Medicaid managed care contract. The Avondale Partners analyst on Tuesday raised his price target for the Nashville-based hospital chain to $21 from $16 and reiterated his ‘outperform’ rating. Campbell's reasoning is that Vanguard is now changing hands at just 6.1 times his lowered 2014 earnings forecast — 75 percent of any profit drop from Arizona will go into next year — and that the hospital sector will see valuations rise to about 7x in the coming quarters.
Chris Rigg at Susquehanna Financial isn’t as upbeat about the Arizona developments but says the company’s smaller, capped contract is “making the best out of a bad situation.”
Shares of Vanguard (Ticker: VHS) rebounded nicely Tuesday, climbing more than 5 percent to $15.37. The move took them to within 14 percent of their recent highs of late last month.