Surgery Partners raised to Buy at BofA on normalizing volumes
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Bank of America upgraded Surgery Partners (NASDAQ:SGRY) to Buy from Neutral on Friday, citing near-term tailwinds from volume normalizations and long-term prospects in a market-wide transition to outpatient care.
Surgery Partners (SGRY) is set to benefit from a pandemic-driven shift to outpatient operations, the analyst Kevin Fischbeck argues, noting that the company runs one of the largest networks of outpatient surgery facilities in the U.S.
Following an industry survey in April, Fischbeck points to the ongoing momentum in outpatient surgeries and strong volumes at ambulatory surgery centers, in line with volume strength seen in healthcare providers' Q1 results.
Apart from a shift to outpatient care, the aging population also contributes to ASC volumes, the analyst added, while highlighting concerns over Surgery Partners' (SGRY) leverage.
However, he rules out any risk related to the company's financial position, noting that SGRY doesn't have debt maturities until 2026, and its cash balance and free cash flows can meet liquidity needs unless EBITDA falls short of expectations.
Bank of America also raised its price target on Surgery Partners (SGRY) to $45 from $42 per share to reflect the company's three-year average EV/EBITDA multiple.