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Investing.com - UBS maintained its Neutral rating and $15.00 price target on Select Medical (TASE:BLWV) Holdings (NYSE:SEM) stock on Wednesday. The stock, currently trading at $15.34, sits near its 52-week low of $14.03, though InvestingPro analysis suggests the company is slightly undervalued based on its Fair Value calculations.
The firm noted that Select Medical is focusing its capital deployment on inpatient rehabilitation facilities, where the company reports occupancy rates around 85% for mature facilities with minimal seasonality. Management expressed satisfaction with this segment’s performance, which is primarily growing through new bed additions. This strategic focus appears to be paying off, with the company achieving 16.44% revenue growth in the last twelve months. (InvestingPro subscribers can access 7 more key insights about SEM’s growth potential and financial health.)
Select Medical revised its 2025 adjusted EBITDA outlook downward in early May to a range of $510-530 million, representing a $10 million reduction at the midpoint. The company attributed this change to a $20 million decrease in expected critical illness EBITDA, partially offset by $10 million in better-than-expected performance from the inpatient segment. For context, the company’s current EBITDA stands at $386.2 million, with a market capitalization of $1.97 billion.
For outpatient rehabilitation, the company continues to experience year-over-year volume increases despite flat pricing, and management remains optimistic about Medicare rate relief beyond 2025. UBS does not anticipate significant changes to the revised outlook when Select Medical reports second-quarter results, scheduled for July 31, 2025.
In its critical illness hospitals (LTACHs), Select Medical reported that occupancy rates have remained consistent with prior experience, with the first quarter starting slowly but finishing strong. The company is being selective about capital deployment in this segment given the current regulatory environment. With a strong free cash flow yield and expected net income growth this year, the company maintains financial flexibility for strategic investments.
In other recent news, Select Medical Corporation announced a partnership with Ballad Health to jointly operate Select Specialty Hospital – Tri-Cities in Kingsport, Tennessee. This facility will function as a hospital-in-hospital within Ballad Health’s Indian Path Community Hospital, expanding access to critical illness recovery services. In financial developments, Benchmark maintained its buy rating on Select Medical, citing growth drivers in its Inpatient Rehab segment and a positive Medicare rate update expected in 2026. However, UBS revised its price target for Select Medical to $15 due to regulatory challenges affecting its Long-Term Acute Care Hospital segment. Benchmark also adjusted its price target to $21 following a 22% drop in stock value, linked to a revised fiscal year 2025 earnings forecast. Mizuho (NYSE:MFG) Securities lowered their price target to $21, noting the impact of an unusually severe flu season on the company’s financial results. Despite these challenges, analysts from Benchmark and Mizuho remain optimistic about Select Medical’s future performance, particularly highlighting the strength of its Rehabilitation Hospitals segment.
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