Jefferies Cuts Price Target on Sun Healthcare (SUNH), Reimbursement Concerns Weight Heavy
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Price: $8.51 --0%
Rating Summary:
0 Buy, 7 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
0 Buy, 7 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Jefferies is maintaining its Buy rating on shares of Sun Healthcare Group (NASDAQ: SUNH), but is lowering its price target from $17 to $15 as the company's FY12 SNF rate proposal has provided a near-term overhang for the stock.
The company released its Q1 results inline with what the firm was anticipating and improved its balance sheet, which now has $86 million in cash and ~$60 million available under its revolver.
The firm believes that the company is strongly positioned to capitalize on its internal growth initiatives as well as accretive acquisition opportunities, particularly in the hospice sector. Since management has not incorporated upside from capital deployment into its 2011 outlook, guidance could prove conservative.
Jefferies comments that, "While CMS's FY12 proposed rule for SNFs provides the potential for an 11.3% reduction in Medicare SNF payments, beginning October 1, 2011, we believe such a drastic cut to reimbursement could be financially devastating to the SNF industry. While the associated overhang will likely keep the stock range-bound until the final rule is released in early August, we see limited downside risk from current levels and would expect the stock to move significantly higher should our expectation prove accurate."
The firm is also lowering its FY11 and FY12 EPS estimates from $1.35 and $1.40 to $1.33 and $1.38.
For more ratings news on Sun Healthcare Group click here and for the rating history of Sun Healthcare Group click here.
Shares of Sun Healthcare Group closed at $11.84 yesterday.
The company released its Q1 results inline with what the firm was anticipating and improved its balance sheet, which now has $86 million in cash and ~$60 million available under its revolver.
The firm believes that the company is strongly positioned to capitalize on its internal growth initiatives as well as accretive acquisition opportunities, particularly in the hospice sector. Since management has not incorporated upside from capital deployment into its 2011 outlook, guidance could prove conservative.
Jefferies comments that, "While CMS's FY12 proposed rule for SNFs provides the potential for an 11.3% reduction in Medicare SNF payments, beginning October 1, 2011, we believe such a drastic cut to reimbursement could be financially devastating to the SNF industry. While the associated overhang will likely keep the stock range-bound until the final rule is released in early August, we see limited downside risk from current levels and would expect the stock to move significantly higher should our expectation prove accurate."
The firm is also lowering its FY11 and FY12 EPS estimates from $1.35 and $1.40 to $1.33 and $1.38.
For more ratings news on Sun Healthcare Group click here and for the rating history of Sun Healthcare Group click here.
Shares of Sun Healthcare Group closed at $11.84 yesterday.
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