UPDATE: Bank Of America Reiterates On HealthSouth On Raised Guidance

In a report published Tuesday, Bank of America analyst Kevin Fischbeck reiterated an Underperform rating on HealthSouth (NYSE: HLS), and raised the price target from $32.00 to $36.00.

In the report, Bank of America noted, “Adj EBITDA of $153m was $8m above our est and $14m above consensus. HLS raised its 2014 Adj EBITDA guidance by $15m at the midpoint to $570-$580m. This is generally in line with our expectations as HLS noted that they would exceed the high end of their original guidance range when they provided an update on the Fairlawn transaction in June. Additionally, HLS raised its EPS guidance $0.13 at the midpoint to $1.98-$2.04 (ex $0.27 gain from Fairlawn).

"Meanwhile, HLS noted that they have signed an agreement with Memorial Health (50-bed IRF) to form a JV in Savannah, GA slated to begin in early 2015. Overall, HLS showed solid core growth in the quarter and with guidance essentially raised by the Q2 beat and full year impact of Fairlawn, guidance appears conservative. We are raising our estimates for the beat to $2.02/$2.09/$2.22 from $1.91/$2.04/$2.17 and raising our PO to $36. However, we are reiterating our Underperform rating as we believe that the company is still exposed to the risk of significant rate cuts over time.”

HealthSouth closed on Monday at $37.64.