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On Tuesday, Benchmark analysts adjusted the price target for Surgery Partners (NASDAQ:SGRY) shares, reducing it to $35 from the previous $40, while maintaining a Buy rating on the stock. Currently trading at $23.75, the company has significant upside potential according to InvestingPro analysis, which indicates the stock is undervalued. The adjustment follows Surgery Partners’ fourth-quarter 2024 results, which met expectations, with EBITDA reaching $632.6 million, and the company’s guidance for 2025, projecting a 10% increase in adjusted EBITDA at the midpoint, slightly below consensus.
Surgery Partners reported a conservative initial outlook for 2025 but is anticipated to deliver strong margin performance in the intermediate term. The company’s performance last year, which included twice the normal volume of mergers and acquisitions (M&A), is expected to contribute to this outlook. Additionally, potential improvements in revenue cycle management (RCM) and supply chain operations, coupled with the effects of low investment but high return on new developments, are projected to become increasingly impactful starting in 2026.
Benchmark’s analysis indicates that with more normalized M&A activity anticipated this year, Surgery Partners should see a notable improvement in cash flow due to reduced expenses related to deal diligence and integration. During the conference call, company management addressed concerns about potential federal healthcare legislation. They clarified that less than 5% of Surgery Partners’ revenue comes from Medicaid and other state-based payments. Regarding proposals for Medicare site neutral payments, the company expects to experience incremental tailwinds, or at worst, a 1% headwind.
In conclusion, Surgery Partners is considered to be largely insulated from the risks and pressures affecting other healthcare providers. The company is well-positioned to sustain double-digit growth in adjusted EBITDA, supported by its "GREAT" overall financial health score according to InvestingPro’s comprehensive analysis. The revised EBITDA outlook for 2025, which aligns with the company’s midpoint guidance, has led to the new price target of $35, as stated by Benchmark analysts. Discover Surgery Partners’ complete financial story, including detailed valuation metrics and growth projections, in the exclusive Pro Research Report, available with an InvestingPro subscription.
In other recent news, Surgery Partners Inc . reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an EPS of $0.44 compared to the forecasted $0.39. The company also exceeded revenue forecasts, reporting $864.4 million against an anticipated $827.9 million. This strong performance contributed to a full-year revenue exceeding $3 billion for the first time, alongside an adjusted EBITDA surpassing $500 million. Surgery Partners provided guidance for 2025, projecting net revenue between $3.3 billion and $3.45 billion, with adjusted EBITDA expected to range from $555 million to $565 million.
In addition, Surgery Partners is considering a proposal from Bain Capital to acquire all outstanding shares at $25.75 per share. This proposal reflects the ongoing interest from private equity firms in the healthcare sector. Meanwhile, KeyBanc maintained its Sector Weight rating on the company’s stock, noting solid same-store revenue growth of 5.6% in the fourth quarter. UBS also maintained a Buy rating on the stock, though it adjusted the price target to $34 from $38, reflecting recent divestitures and updated 2025 guidance.
These developments indicate significant strategic movements for Surgery Partners, with both operational achievements and potential changes in ownership on the horizon. Investors will be closely monitoring the company’s progress toward achieving its revised financial targets and the outcome of the Bain Capital proposal.
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