UBS Cuts Price Target on Civitas Solutions (CIVI) to $24; Expects 2017 Headwinds
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UBS maintained a Buy rating on Civitas Solutions (NYSE: CIVI), and cut the price target to $24.00 (from $28.00), after adjusting estimates. UBS is expecting headwinds to limit 2017 growth. One of the primary headwinds for CIVI heading into next year relates to the company's significant fiscal issues related to the coal industry's decline and relatively low energy prices in West Virginia.
Analyst A.J. Rice commented, "Civitas is expected to provide FY17 guidance with its Dec year-end earnings release. A review of headwinds and tailwinds has led us to trim our 2017 EBITDA estimate. The company's FY17 earnings should benefit from recent acquisitions and a strong deal pipeline, as well as positive rate increases in markets such as CA. However, these pos drivers (which would normally allow the company to grow Y/Y EBITDA by about 8%) will be offset by unusual payment pressures in W VA, increased labor expense, the impact of the DOL overtime rule, and incr health insurance costs. We believe management will try to offset the noted headwinds, and we have, therefore, assumed that roughly $4.5 mln or 2.5% of SG&A can be trimmed. We are adjusting our FY17 EBITDA estimate from $172.1 mln to $163.9 mln to reflect our updated analysis."
Shares of Civitas Solutions closed at $18.04 yesterday.
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