Stephens cuts Addus HomeCare target to $142, keeps overweight rating

On Wednesday, Stephens analyst Scott Fidel adjusted the price target for Addus HomeCare (NASDAQ:ADUS), a provider of comprehensive home care services, to $142.00, down from the previous target of $153.00. The stock, currently trading at $97.53, has experienced a significant 13.9% decline over the past week, and according to InvestingPro analysis, appears to be undervalued. Despite this reduction, the firm maintained an Overweight rating on the stock, aligning with the broader analyst consensus of 1.5 (Strong Buy).

Fidel’s remarks highlighted Addus HomeCare’s long-term annual revenue growth algorithm of over 10%, indicating a sustained effort to maintain a strong and diversified mergers and acquisitions (M&A) pipeline. This strategy is pursued while keeping net leverage ratios below 1.0x. The company has not formally provided guidance for 2025 but has reaffirmed its commitment to this growth trajectory.

The company’s outlook for 2025 appears to be largely unaffected by the current legislative uncertainties regarding potential Medicaid funding reforms. Addus HomeCare anticipates that any broader impacts of such reforms would not begin until after 2025. The company also provided specific data points to support its position.

Addus HomeCare considers its role within the Medicaid system—serving older adults and the disabled in a low-cost setting—as relatively shielded from potential funding cuts that could affect the broader payer and provider landscape. Regarding per-capita caps on Medicaid, the company’s patient demographic is expected to be less impacted since such caps may not be uniformly applied across all Medicaid beneficiaries.

Additionally, the potential reduction or elimination of the Federal Medical (TASE:BLWV) Assistance Percentages (FMAP) floor is projected to influence only about 2% of Addus HomeCare’s consolidated revenues, specifically in the states of California and Washington.

The revised price target of $142 takes into account the lowered estimates while affirming the Overweight rating, suggesting that Stephens continues to see Addus HomeCare as a stock with a positive outlook despite the adjustments. For deeper insights into Addus HomeCare’s financial health, which InvestingPro rates as "GREAT" with an overall score of 3.46 out of 5, investors can access the comprehensive Pro Research Report, available exclusively to subscribers along with 8 additional ProTips and extensive financial metrics.

In other recent news, Addus HomeCare reported a strong fourth quarter for 2024, exceeding analysts’ expectations with an earnings per share (EPS) of $1.38, slightly above the forecasted $1.35. Revenue also surpassed projections, reaching $297.1 million against a forecast of $284.28 million, marking a 7.5% year-over-year increase. Despite these positive financial results, the company’s stock experienced a decline, possibly due to investor concerns about potential Medicaid policy changes. The company completed a significant acquisition and launched new technology for caregivers, which are expected to support future growth. Raymond (NSE:RYMD) James adjusted its price target for Addus HomeCare, lowering it from $140 to $120, but maintained an Outperform rating due to the company’s strong balance sheet and consistent execution. Addus HomeCare’s full-year revenue reached $1.2 billion, reflecting a 9.1% increase from the previous year, and the company remains focused on strategic acquisitions to drive further growth. The ongoing challenges in the clinical labor market and potential Medicaid cuts continue to be areas of concern for the company, as noted by analysts.

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