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.
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.
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
Analyst Paula Torch at Avondale Partners has raised her price target for shares of Acadia Healthcare following the company's second-quarter profit report. The Franklin-based behavioral health care provider is ahead of plan this year in adding beds to its facilities, and new projects will add to the company's ability to grow its top line to $4 billion by 2018. Torch also says margins — especially at the company's United Kingdom and acquired CRC operations — still have upside. That has led her to lift her target for Acadia, which closed Friday (Ticker: ACHC) at $81.78, to $96 from $84. Year to date, they're up more than 30 percent.
Though still highly leveraged, ACHC has consistently demonstrated its ability to generate cash from its current portfolio, and we expect continued solid operating cash flow in 2015 and 2016 to help ACHC execute on deals.
Torch also has taken stock of Community Health Systems' Q2 results and outlook. She's sticking with her 'outperform' rating even though volume and pricing trends "continue to lag peers," mostly due to hospitals previously owned by Health Management Associates. But the factors holding down CHS' valuation — its higher leverage and integration risks, among others — "are starting to mitigate and show signs of improvement," Torch writes. She still sees CHS (Ticker: CYH) climbing to $77 from the $56 and change at which it ended last week.
Analyst Paula Torch at Avondale Partners says investors should take advantage of the little drop in shares of HCA Holdings since the hospital giant’s second-quarter profit report and conference call. Torch says HCA executives’ comments about the impact of health care reform may have led to the 7 percent intraday drop in HCA shares (Ticker: HCA) Wednesday. (They rebounded later in the day but gave up another 1 percent Thursday.)
Torch says not to pay any mind to that. HCA’s operations are on track, with strong volume trends offsetting a little pricing softness. On top of that, she said, the company’s financial muscle will continue to give it the option to add to that growth via M&A.
While HCA continues to utilize free cash flow to pay down its long-term debt, Management stressed that they have the flexibility to lever up to 3.5x to 4.5x to maintain its active acquisition pipeline, especially in the outpatient space.
Torch’s target for HCA shares, which closed Thursday’s trading at $91.38, is $103.
Paula Torch at Avondale Partners really likes the look of AmSurg following the surgery center and physician services company's second-quarter profit report. The integration of the Sheridan physician services business is running smoothly, she says, while organic growth is topping expectations and the acquisition pipeline is solid. In response, Torch has hiked her price target for AmSurg (Ticker: AMSG) all the way to $90 from $74. After popping this week on the heels of the Q2 report, AmSurg is changing hands Thursday morning at almost $84.
Given the 1H performance and Management's execution thus far, 2015 guidance could still wind up being conservative as we expect strong ASC and PS metrics to continue. Furthermore, we feel more comfortable with AMSG's cross-selling initiatives, which are above internal expectations and its ability to execute on JV partnerships.
RBC Capital Markets analyst Brad Heffern has reiterated his 'outperform' rating on shares of Delek US Holdings in the wake of the company's Q2 earnings report. But he has lifted his price target for the Brentwood-based company to $44 from $42. That leaves more than 25 percent of upside from where Delek (Ticker: DK) is changing hands Thursday morning.
Avondale Partners analyst Paula Torch says investors should expect generally good second-quarter numbers from hospital operators in the coming weeks. The recent positive preview from industry leader HCA Holdings was a good tell and should generally translate to other operators. Torch expects LifePoint report earnings per share of $1.01, two cents above analysts’ consensus, on the back of good patient volumes, better cost controls and the upgrading of acquired hospitals. But she’s not as bullish on the prospects of Community Health Systems, which she expects will earn 88 cents per share, a penny less than consensus. But revenues should be strong, she says, helped by easier comparisons to last year’s Q2 and helping to offset spending on doctor recruitment at former HMA hospitals.
Avondale Partners analyst Paula Torch said she expects AmSurg to report second quarter earnings in-line with expectations with potential for upside. Torch also said adjusted earnings per share could exceed analysts' expectation of 85 cents, which is above the ambulatory surgery center's guidance range of 81 cents to 84 cents.
AmSurg has completed six acquisitions this year. "While we continue to believe the pipeline is robust, we look for more color on the pace and ability to meet or exceed $200 million in capital spend on M&A in 2015," Torch said in a report.
Shares of AmSurg (Ticker: AMSG) were down 1 percent to $68.27. Year to date, they're up almost 25 percent.
Hospital stocks are seeing a lot of action after the Supreme Court ruled Thursday to uphold subsidies for consumers buying health insurance in states using the federal marketplace.
Avondale Partners analyst Paula Torch reiterated her 'market outperform' rating for HCA Holdings and raised the firm's price target to $103 from $90, saying the Supreme Court ruling "clears the runway for the multiple to expand."
Mizuho analyst Sheryl Skolnick has upgraded the stocks of Community Health Systems from 'neutral' to 'buy' and raised her $52 price target all the way to $83.90. On the flip side, CHS was downgraded by Raymond James John Ransom, who dropped the firm's 'outperform' rating to 'market perform.'
Also happening today:
• Leerink analyst Ana Gupta raised her price target for HCA from $95 to $100. She also raised her target for CHS to $70 from $60 and LifePoint Health from $75 to $85.
• Analysts at Oppenheimer raised their price target on HCA to $82 from $60 and CHS to $102 from $87.
• Jefferies analyst Brian Tanquilut raised his price target for HCA to $108 from $95 and CHS to $79 from $75.
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