Healthcare services equities edged higher last week while the overall market fell, according to Jefferies. The brokerage said healthcare services stocks rose an average of 0.5% over the period, in contrast with a 2.6% drop in the S&P 500.
Jefferies identified several individual outperformers and laggards. The strongest performers included LeMaitre Vascular Inc, AMN Healthcare Services Inc, CVS Health Corp’s Aetna unit and Acadia Healthcare Company Inc. By contrast, the largest declines were recorded by Aveanna Healthcare Holdings Inc, National Vision Holdings Inc, Tenet Healthcare Corp and The Pennant Group Inc.
Acadia Healthcare
Following a management tour, Jefferies upgraded Acadia Healthcare. The firm said the meetings increased its confidence in management’s ability to bring capacity planned for the 2024-2026 period fully online and to convert that capacity into earnings. Analysts pointed to potential upside in the second quarter from funding tied to the Florida Developmental Disability Program and from an expected uptick in bed occupancy in the second half of the year.
Hospitals and surgical volumes
Investor sentiment toward hospitals and ambulatory surgery centers remains cautious after a public company reported high single-digit percentage declines in surgical volumes in the second quarter. Jefferies relayed comments from HCA Healthcare Inc’s chief financial officer, who told the firm that demand overall is intact but that pressure has emerged mainly from payer mix shifts linked to the expiration of health insurance exchange subsidies. Jefferies noted that HCA reiterated an expected headwind in the range of $600 million to $900 million.
Jefferies also met with leadership at Surgery Partners Inc at the company’s headquarters. Management described steady growth in higher-acuity cases and improved execution, and they reiterated their full-year volume guidance. The company indicated that mergers and acquisitions and new locations are expected to drive longer-term expansion, and said that three previously challenged markets and associated costs are showing improvement.
BrightSpring and ownership dynamics
BrightSpring Health Services Inc priced a secondary offering this week of 15 million shares at $58.75. Jefferies reported that the stock traded modestly lower following the placement. The firm also noted that KKR & Co Inc’s ownership in BrightSpring now sits below 15%, which Jefferies believes removes a meaningful overhang. Jefferies continues to rate BrightSpring as a top pick based on an expected 15% to 20% EBITDA growth trajectory.
Chemed and board proposal
Bloomberg reported that Barrington proposed a new director for the board of Chemed Corp. Jefferies said the suggested director has an industrial background that could open strategic alternatives for Chemed’s plumbing segment, including a possible spin-off or sale. Jefferies noted that Chemed has not provided a comment on the proposal.
Overall, Jefferies’ recent meetings across the healthcare services landscape produced a mix of takeaways: greater conviction around certain behavioral health rollouts and service providers, offset by persistent payer mix pressure and near-term volume softness at hospital systems and surgical providers. The firm’s notes highlighted specific catalysts and headwinds to watch closely over the coming quarters.