OK, so we're catching up to the details of the very good day hospital stocks had following President Obama's re-election. Shares of HCA Holdings were upgraded by Matthew Borsch at Goldman Sachs to 'buy' from 'neutral.' Borsch now has a $39 price target on the stock of Nashville's largest company (Ticker: HCA), up from $31. A.J. Rice at UBS has made a similar call regarding Vanguard Health Systems (Ticker: VHS), which climbed 5 percent, respectively, on Wednesday.
Veteran Robert W. Baird researcher Whit Mayo on Wednesday came out in support of Acadia Healthcare, saying the behavioral health play remains a top pick following its strong third-quarter results. Mayo reiterated his 'outperform' rating on the stock (Ticker: ACHC), which has more than doubled in 2012.
The insurer-hospital relationship isn't a simple zero-sum game, but Goldman Sachs' Wednesday downgrade of HMO shares such as Aetna and Humana because of rising costs should be a positive for hospitals' admissions and — if reimbursement rates don't fall too much — their bottom lines. Judging by the stock prices of HCA, CHS, LifePoint and Vanguard, investors didn't feel that way Wednesday, but it's worth noting that the market was in a rather foul mood for much of the day.
Goldman Sachs analyst Matthew Borsch says the business trends at Community Health Systems are solid and that the shadow of a government investigation into the company's billing practices isn't quite as ominous. Because of that, he has upgraded shares of the Franklin-based company to 'neutral' from 'sell' and lifted his price target to $27 from $19. The move lifted CHS (Ticker: CYH) on Tuesday but the stock hasn't been able to escape the soggy market Wednesday and was changing hands late in the morning at about $24.65.
Not surprisingly, a number of analysts are voicing their views on HCA's earnings miss, which cost the company more than $3 billion in market value Monday. Kemp Dolliver at Avondale Partners has lowered his earnings estimates and price target (to $35 from $38) but is keeping his 'outperform' rating and recommends investors jump in now. (Sheryl Skolnick at CRT Capital agrees.) Dolliver says real operating problems usually take a while to develop and is taking the view that the drop in surgical volumes was a one-off.
Given the absence of confirming data, we view this quarter's results [as] cause for concern and moderated expectations, but not enough to "punt" on the stock. Signs of competitive issues or coding issues will send us scurrying.
Matthew Borsch at Goldman Sachs isn't being quite as kind. He has downgraded HCA (Ticker: HCA) to 'hold' and slashed his price target from $40 to $31, saying it will take the management team a long time to regain credibility.
SEE ALSO: A Bloomberg piece discussing the chance that this is a macro problem not isolated to HCA
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