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On Monday, KeyBanc Capital Markets adjusted its outlook on Acadia Healthcare Company, Inc. (NASDAQ:ACHC), reducing the price target from $70.00 to $65.00. Despite the price target adjustment, the firm maintained its Overweight rating on the healthcare provider’s stock. According to InvestingPro analysis, the stock appears undervalued at current levels, with a P/E ratio of 10.6x and an EV/EBITDA multiple of 7.3x.
The revision follows Acadia Healthcare’s recent disclosure of its fourth-quarter results and its outlook for 2025, which did not meet expectations. KeyBanc analyst Matthew Gillmor noted that the company’s stock experienced a significant drop last Friday, falling 25% in contrast to the S&P 500’s 1.6% gain. Gillmor pointed out that the decline likely stemmed from two main factors: the revelation of additional challenges not previously communicated in January when the company indicated that volumes had stabilized, and growing concerns regarding potential risks to Medicaid provider taxes.
Despite these setbacks, KeyBanc’s analysis suggests that Acadia Healthcare’s core EBITDA (earnings before interest, taxes, depreciation, and amortization) growth is projected to be in the 0-5% range for 2025, considering various factors. This forecast is deemed conservative by the analysts.
Gillmor also mentioned the potential for operational improvements at certain underperforming facilities and the Tennessee Doctor Payment Program (DPP) to provide unexpected benefits. He concluded that as Acadia Healthcare’s EBITDA and free cash flow (FCF) are expected to accelerate in 2026, the company’s valuation should normalize as these improvements become more apparent throughout 2025.
In other recent news, Acadia Healthcare Company Inc. reported disappointing financial results for the fourth quarter of 2024. The company missed both earnings per share (EPS) and revenue forecasts, with an EPS of $0.64 compared to the expected $0.72, and revenue of $774.2 million, falling short of the anticipated $780.22 million. This marks a significant deviation from the company’s historical trend of meeting or exceeding expectations. Despite a 4.2% year-over-year revenue increase, the adjusted EBITDA margin declined to 19.8% from 22.8% the previous year, highlighting increased operational costs or inefficiencies.
Looking ahead, Acadia Healthcare projects revenue between $3.3 billion and $3.4 billion for 2025, with adjusted EBITDA expected to range from $675 million to $725 million. The company plans to add 800 to 1,000 new beds in 2025 and anticipates an adjusted EPS of $2.50 to $2.80. Despite these challenges, Acadia remains focused on expansion efforts, including new hospital openings and bed additions. The company also announced a $300 million share repurchase program as part of its capital allocation strategy.
In terms of analyst activity, there were no specific upgrades or downgrades mentioned, but the financial results have prompted concerns over Acadia’s ability to meet financial targets. The company continues to face operational challenges, particularly with underperforming facilities, and has increased reserves for self-insured liability claims, impacting financial stability. Despite these hurdles, Acadia remains committed to its growth strategy and improving facility performance.
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