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Sector Snap: Nursing home operators

Fri, 01/07/2011 - 8:46am
The Associated Press

An analyst for Morgan Keegan raised his expectations and price targets for three nursing home operators on Friday, saying a new Medicare reimbursement system will boost their revenue.

Analyst Robert Mains said he now expects better results from National HealthCare Corp., Skilled Healthcare Group Inc., and Sun Healthcare Group Inc. He raised his 2011 and 2012 profit estimates for National HealthCare and his 2011 forecast of Skilled Healthcare's profit. All three stocks are rated "Outperform."

On Thursday, Skilled Healthcare raised its profit and revenue estimates for 2010 and issued a stronger-than-expected forecast for the new year. The Foothill Ranch, Calif., company credited better results from hospice and home health care businesses.

Sun Healthcare also issued an annual outlook that was about equal to Wall Street estimates. Sun Chairman and CEO William Mathies said Thursday the new Medicare reimbursement system will increase its revenue and its profit before items like interest, taxes, and rent.

Mains lowered his profit outlook for Sun, which is based in Irvine, Calif. However, he raised his estimate for earnings before interest, taxes, depreciation, amortization, and rent, which he said is a more important metric for the company. Also, he lifted his price target by $2 to $17.

The analyst raised his target for National HealthCare to $52 from $44 and his target on Skilled Healthcare to $14 from $11. Shares of National HealthCare, which is based in Murfreesboro, Tenn., dipped 91 cents to $45.29 in midday trading. Skilled Healthcare stock shed 4 cents to $10.62 and shares of Sun Healthcare lost 8 cents to $13.52.

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