On Thursday, TD Cowen adjusted its outlook on Surgery Partners (NASDAQ:SGRY) shares, a leading healthcare services company. The firm's analyst, Ryan Langston, revised the price target to $32.00, decreased from the previous $36.00, while keeping a Buy rating on the stock.
The adjustment came after Surgery Partners reported adjusted EBITDA less NCI (Net Corporate Income) of $129 million, marking a year-over-year increase of 22%, which marginally surpassed the consensus and TD Cowen's prediction of $128 million. However, the company's adjusted earnings per share (EPS) of $0.19 fell short of the consensus estimate of $0.25.
In response to the financial outcomes, TD Cowen has slightly altered its adjusted EBITDA forecast for Surgery Partners. The new price target of $32 reflects approximately 13 times the projected 2025 enterprise value to EBITDA minus NCI ratio.
The analyst's commentary highlighted the specifics behind the price target revision: "We revise our adj EBITDA slightly, and our PT moves to $32 from $36, representing ~13x 2025 EV/(EBITDA-NCI)."
Surgery Partners, with its adjusted financial metrics and the updated analysis from TD Cowen, continues to be seen as a favorable investment by the firm, as indicated by the maintained Buy rating despite the reduction in the price target.
In other recent news, Surgery Partners reported a robust third quarter with net revenue climbing 14% year-over-year to $770 million and adjusted EBITDA rising by 22% to $128.6 million. The company's successful recruitment of over 230 new physicians and a 53% increase in total joint replacements were instrumental in these positive results.
Despite facing challenges such as Hurricane Helene, Surgery Partners maintained operational continuity and witnessed growth in surgical case volume and same-facility net revenues.
Global investment firm Jefferies revised its price target for Surgery Partners downward to $40.00 from the previous $47.00, maintaining a Buy rating on the stock. This adjustment was influenced by investor dissatisfaction regarding the company's free cash flow and the absence of a company sale announcement.
However, Jefferies expressed confidence in Surgery Partners' financial strategy and its ability to fund future expansions using its free cash flow and access to a revolving credit facility.
Meanwhile, Barclays (LON:BARC) also adjusted its outlook on Surgery Partners, reducing its price target from $32.00 to $31.00. The firm maintained its Equalweight rating on the stock, citing financial challenges faced by the company throughout the year. Despite these challenges, Barclays expects an uplift in free cash flow as the company extends its working capital in the fourth quarter.
Overall, these recent developments highlight Surgery Partners' ability to navigate financial and operational challenges while maintaining a strong position in the healthcare services sector. It is worth noting that the company anticipates full-year net revenue and adjusted EBITDA to exceed $3.075 billion and $508 million, respectively, surpassing its long-term growth target of 2% to 3% with a 4% same-store case growth year-to-date.
InvestingPro Insights
To complement TD Cowen's analysis of Surgery Partners (NASDAQ:SGRY), recent data from InvestingPro offers additional context for investors. Despite the company's challenges, InvestingPro Tips suggest that net income is expected to grow this year, and analysts predict the company will be profitable this year. This aligns with the positive outlook maintained by TD Cowen, even with their reduced price target.
The company's financial health shows mixed signals. While Surgery Partners has demonstrated strong revenue growth, with a 9.96% increase over the last twelve months to $2.98 billion, it's important to note that the company was not profitable during this period. The adjusted EBITDA of $595.9 million for the same timeframe represents a 14.18% growth, which supports TD Cowen's observation of the company's improving EBITDA performance.
Investors should be aware that SGRY's stock has experienced significant volatility recently. An InvestingPro Tip indicates that the stock has taken a big hit over the last week, with data showing a 16.13% decline in the 1-week price total return. This recent downturn may present an opportunity for investors who agree with TD Cowen's bullish stance, as the current price of $25.51 is below the fair value of $36 suggested by analyst targets.
For those seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Surgery Partners, providing a deeper understanding of the company's financial position and market performance.
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