Market Overview

5 Key Reasons To Invest In Mednax

5 Key Reasons To Invest In Mednax

Giving five justifications for its analysis, KeyBanc Capital Markets upgraded shares of MEDNAX Inc (NYSE: MD).

The rating on the shares goes from Sector Weight to Overweight, with the price target at $51.

1. Headwinds Expected To Normalize

Analyst Jason Gurda believes operating headwinds are likely to normalize over time. The headwinds that have been impacting the company include adverse payer mix shift in anesthesia, a lower than normal birth rate and wage inflation for anesthesia nurses, the analyst said.

Gurda believes the company, though unlikely to see an immediate improvement in these headwinds, could see these moderate over the next few quarters.


2. Headwinds To Be Countered By Offsetting Factors

KeyBanc believes the company's recently announced restructuring of a few hospital contracts and the Medicaid rate increases it has lobbied could address the operating headwinds. The firm also noted that the company is making rapid strides in physician office productivity and reductions in corporate G&A. The expected savings from G&A reductions, according to the firm, could be a positive catalyst for the shares.

3. Strong Radiology Growth

The firm believes the company stands to generate strong growth in its third physician specialty, radiology, two years after acquiring the teleradiology business vRad.

"We believe MD's offering of on-site and offsite technology enabled radiology svs will be well received by physician groups and hospitals," the firm said.

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4. Inexpensive Valuation

The firm also noted that Mednax's shares have become relatively inexpensive, especially due to its 9-percent free cash flow yield.

5. Acquisition Target

KeyBanc believes there is a decent chance the company will be acquired over the next few years. The firm said its model showed that an LBO take-out price in the low to mid-$50s is reasonable. The firm also noted that private equity has previously shown a lot of interest in the sector.

To reflect the impact of the recent hurricanes, the firm said it is trimming its near-term estimates.

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Latest Ratings for MD

Jan 2020DowngradesBuyNeutral
Dec 2019MaintainsNeutral
Dec 2019MaintainsHold

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