UBS Raises Price Target on Select Medical Holdings (SEM) to $11; Reiterates Sell Rating

UBS reiterated a Sell rating on Select Medical Holdings (NYSE: SEM), and raised the price target to $11.00 (from $8.00), following the company's 1Q. SEM noted that a shortage of nurses is driving higher wages, more contract labor, and even some volume pressure as the company has turned away some referrals. Management characterized the situation as the worst it has seen in the past 6-7 years.

Analyst A.J. Rice commented, "SEM advised that it now has 53/108 LTACs under criteria through March, with another 19 coming online in 2Q16r. The 53 locations have reported a 3.9% decline in census or a loss of about 1.1 patients per hospital. Mgt noted that the hospitals that came online in 4Q15 have better census trends than the group in 1Q16, which gives them confidence that vols can be built back up over a few quarters. Mgt says its decision to no longer take site neutral patients has not resulted in pushback from discharge planners across its referring hospital base. SEM is seeing a notable incr in avg acuity at its compliant hospitals, which drove the 4.3% incr in rev per day in 1Q16. This is being partially offset by the higher cost (nursing, etc.) of treating this subset of patients."

For an analyst ratings summary and ratings history on Select Medical Holdings click here. For more ratings news on Select Medical Holdings click here.

Shares of Select Medical Holdings closed at $12.54 yesterday.

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