Select Medical Scales New 52-Week High - Analyst Blog

On May 23, 2014, shares of Select Medical Holdings Corporation SEM scaled a new 52-week high of $14.55. With about 1.31 million shares exchanging hands in the last trading session, the share price moved up 3.87%. The momentum was driven by earnings strength and continued focus on enhancement of shareholders' value. The year-to-date return from the stock came in at 25.3%, zooming past the S&P's return of 2.8%.

This Zacks Rank #1 (Strong Buy) healthcare provider clocked a positive surprise of 4.2% in the first quarter taking the tally of beat to 3 of the last 4 quarters with an average of 1.7%. Top line improved 1.7% year over year.

With respect to enhancing shareholders' value, the board of directors of Select Medical Holdings inflated the share buyback program by $150 million to $500 million. The company spent $109.5 million to buy back 10 million shares in the first quarter, taking the tally to 33.6 million shares repurchased for $283.1 million to date. Its dividend yield of 2.75% also betters the industry average of 1.31%.

Select Medical Holdings stays confident of delivering operating income per share of 89–97 cents per share in 2014 on revenues of $3.05–$3.15 billion. While the Zacks Consensus Estimate of 95 cents earnings is near the top end of the guidance, the revenue estimate of  $3.17 bilion is above the company's expectation. Select Medical Holdings expects adjusted EBITDA between $365.0 million and $385.0 million and net income of 88–96 cents per share.

A steady operational and financial performance by the Select Medical Holdings helped the Zacks Consensus Estimate to move north as all the estimates were raised in the last 30 days. The Zacks Consensus Estimate is currently pegged at 95 cents for 2014 (up 11.2%) and $1.01 for 2015 (up 5.2%). The expected long-term growth rate of the stock is 12.5%.

Other Stocks to Consider

Some other healthcare providers worth considering include Triple-S Management Corp. GTS, Health Net, Inc. HNT and WellCare Health Plans, Inc. WCG. While Triple-S Management sports the same Zacks Rank as Select Medical, Health Net and WellCare Health carry a Zacks Rank #2 (Buy).