Avondale: AAC at 'compelling valuation'

Avondale Partners analyst Paula Torch says investors should look at the beaten-up shares of AAC Holdings — they've recovered only slightly from their summer slump — as a chance to buy a company with a clear growth pipeline and the financing to pull it off.

Yes, the legal issues in California that caused the stock to fall in the summer are still there, Torch says, but she has her fingers crossed that there will be clarity in the coming months. In the meantime, the AAC team has access to $100 million in M&A capital, and an organic expansion push should grow to 1,200 the beds in AAC's portfolio next year, with another 150 new beds slated for 2017.

"AAC continues to execute well and fundamentals remain intact with overhangs resulting in a compelling valuation vs. growth. We believe census remains strong, referral sources are healthy, and recent financing provides an extended bridge to execute on its current expansion plans," said Torch, who is sticking by her $32 price target for AAC, shares of which are changing hands this morning at $22.70.

Nov 20, 2015 8:59 AM

Avondale adds three to analyst team

Two health care researchers make move from Cantor, local office of Sterne Agee; firm also adds sales trader
Nov 10, 2015 7:21 AM

Analyst action: Avondale, Mizuho on CHS

Avondale Partners analyst Paula Torch has lowered her price target for Community Health Systems from $60 to $40 based on the Franklin company's weak third quarter. However, Torch is maintaining her 'market outperform' rating for the company and says there is opportunity for CHS to improve during the fourth quarter because of the solid performance expected from its legacy facilities.

"Former HMA facilities continue to create a drag on earnings," Torch wrote in a report this week.

Additionally, Mizuho Securities analyst Sheryl Skolnick has cut her price target for the second time in two weeks, from $34 to $30. In late October, she slashed her target from $77 after CHS issued a profit warning.

Shares of CHS (Ticker: CYH) were up 3.5 percent mid-day Wednesday to $28.34. Year to date, though they're still down 47 percent.

Nov 4, 2015 11:31 AM

Avondale analyst cuts HCA target

Paula Torch at Avondale Partners has updated her models for HCA Holdings after the hospital giant formally reported its third-quarter numbers.

Torch is still “confident in management's ability to manage through HR issues which pressured 3Q” and likes that volumes are holding up.

Still, the cost of drugs and people could put pressure on all hospital operators in 2016 and beyond and has Torch “baking in an increased level of conservatism into our numbers.” She has adjusted her 2016 estimates and trimmed her price target to $85 from $103. But she’s reiterating her ‘market outperform’ rating and says investors should look at weakness as a buying opportunity.

At about noon Wednesday, HCA (Ticker: HCA) was changing hands at $68.88, flat on the day.

Oct 28, 2015 2:23 PM

Time to take a breath on hospital stocks

Analysts say ACA benefits remain in place; 'Plenty of tailwind in the market'
Oct 26, 2015 7:04 AM

Is CHS' credibility now on the line?

'Investors likely to be skeptical' of new guidance; stock off by 35%, one analyst cuts target more than $40
Oct 22, 2015 1:55 PM

AmSurg proposal overshadowing earnings beat

AmSurg's headline-grabbing proposal to acquire Knoxville-based TeamHealth overshadowed its strong third-quarter earnings preview, said Avondale Partners analyst Paula Torch in a report late Tuesday.

The company beat analysts' expectations by a wide margin, posting estimated revenues for the third quarter of $650 million compared to $502 million the year prior. Adjusted net earnings were estimated to be $53.0 million compared to $34.6 million in the third quarter of last year. Adjusted earnings per diluted share are expected to be $1.03, compared to 69 cents.

"Given AMSG's stock is currently trading down 5 percent, we believe the merger proposal is overshadowing a strong earnings beat in 3Q," Torch wrote in her report.

AmSurg took its proposal to buy TeamHealth for $7.8 billion public Tuesday. TeamHealth rejected the plan, saying it undervalues the company. AmSurg shares (Ticker: AMSG) closed Tuesday trading down 4 percent at $74.88.

Oct 21, 2015 7:15 AM

Only LifePoint gets a 'buy' from wary Citi; Avondale still bullish

Citi analysts have launched coverage of various segments of the health care sector, including hospitals. They're not all that upbeat about the hospital space, giving most players a 'hold' rating. Only LifePoint Health merits a 'buy' in their opinion; they see its shares (Ticker: LPNT) climbing to $82 from about $71 today. Overall, the analysts say they are "more tempered" on the hospital industry because of doubts about the continued growth in volumes amid difficult comparisons as well as "unease around potential bad debt creep."

Locally based Avondale Partners analyst Paula Torch has been bullish on LifePoint for a while. In a note Friday, she reiterated her 'outperform' rating and $94 target and says a big part of the company's appeal is its success buying and integrating smaller players.

If the remaining $600M in announced acquisitions closes by the end of 2015, LPNT will have added ~$1.85B in revenue over two years. Given the size, quality, and improved infrastructure, we believe the class of '14 and '15 deals could add over $200M in EBITDA by 2018.

Oct 2, 2015 11:54 AM

Avondale: AmSurg now a conviction buy

The team at local investment bank Avondale Partners has added AmSurg shares to its conviction list. Analyst Paula Torch says the company is having great success working its Sheridan anesthesia into its surgery centers, which is driving both the top line and profitability. She has lifted her EBITDA margin forecast to 19.1 percent from 18.8 percent and her EPS estimate to $4.15 from $4.00. And that's without the expected (and maybe more unexpected) M&A activity.

We believe there are plenty of deals to go around and the development team will go after what fits and what is financially sound. [...] In our view, while AMSG will likely strike on a deal that makes sense for them across their various service lines, we continue to anticipate more deals in anesthesia, radiology, and children's services, but believe there is appetite for ED deals if they become available.

Torch also has raised her price target for AmSurg (Ticker: AMSG), which closed last week's trading at $82.71, to $94 from $90. Her call comes less than two months after she hiked her price target all the way from $74.

Sep 28, 2015 8:39 AM

Avondale trims HealthStream target on ICD-10 dropoff

Analyst Peter Heckmann says HealthStream will struggle in 2016 to post the growth investors have become used to of late because of the expected dropoff in revenues from training products related to the new ICD-10 medical classification system. That book of business accounted for 17 percent of HealthStream's top line last year but Heckmann says that share will fall off to less than 4 percent by the end of 2016.

HealthStream's leaders are working to offset that drag — their Precyse DNA coding proficiency platform should bring in $2 million in sales this year — but Heckmann has nonetheless lowered his price target for the company's shares to $30 from $34 while keeping his 'market outperform' rating. HealthStream (Ticker: HSTM) closed Friday's trading session at $24.21.

SEE ALSO: CEO Bobby Frist earlier this summer discussed his team's plans to migrate to other products customers who came to HealthStream for ICD-10 services

Sep 8, 2015 7:09 AM