Deutsche Bank Upgrades Acute Care Hospitals Sector View from Neutral to Positive - Raises CYH, HMA, LPNT & THC to 'Buy'

June 1, 2009 7:36 AM EDT

Deutsche Bank upgrades Acute Care Hospitals Sector View from Neutral to Positive.

Deutsche analyst says, "With this note, we are upgrading shares of Community Health (NYSE: CYH), Health Management (NYSE: HMA), LifePoint (Nasdaq: LPNT) and Tenet Healthcare (NYSE: THC) to Buy
from Hold as we are forming a more positive fundamental view of the hospital sector based on: (1) improving prospects for health care reform; (2) EPS out-performance over the near term due to better expense control and a less steep rise in bad debt versus expectations; (3) improving balance sheets;
and (4) a supply/demand imbalance of equity market cap as more investors become attracted to the secular theme of reform against a limited pool of investment options."

"Despite recent strength in hospital stocks, we believe the sector still has compelling upside from current levels. We believe expense management is trending well ahead of expectations (especially labor costs) and patient mix trends remain relatively stable -- thus mitigating the near-term risk for bad debt misses. We are increasing our 2009-2010 EPS estimates, putting us solidly above consensus; the revisions stem primarily from better expense leverage. Furthermore, the companies with the most levered balance sheets (CYH, HMA and THC) are poised for more aggressive de-leveraging over the next 12 months - thus improving the equity value mix of these enterprises (currently 80% of their TEV is weighted in debt)."

Related Categories

Upgrades

Stocks Mentioned

Related Entities

• Deutsche Bank

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?