Credit Suisse has initiated coverage on a number of managed care and health care facilities stocks and is mostly bullish on the space. In the initiation note, analyst A.J. Rice said the fundamentals of managed care stocks are appealing, but their current valuations likely limit upside.
The managed care space is positioned to grow operating earnings by 9 to 12 percent, Rice said. (See Rice's track record here.) Capital deployment should also help boost earnings by 4 to 6 percent, the analyst said.
Rice is more selective with hospital stocks, but pointed out that investor expectations are low at this point. While hospitals seem to have costs under control, Rice said there is “no obvious source of positive margin leverage” for them.
Credit Suisse’s top stock picks in the space include the following Outperform-rated names:
- Anthem Inc ANTM: $234 price target
- CIGNA Corporation CI: $219 price target
- UnitedHealth Group Inc UNH: $233 price target
- HCA Healthcare Inc HCA: $95 price target
- Universal Health Services UHS: $126 price target
- Service Corporation International SCI: $40 price target
- Healthcare Services Group Inc. HCSG: $62 price target
Credit Suisse set Neutral ratings for the following group of stocks:
- Aetna Inc AET: $174 price target
- Centene Corp CNC: $102 price target
- Humana Inc HUM: $256 price target
- LifePoint Health Inc LPNT: $126 price target
- Tenet Healthcare Corp THC: $15 price target
- Acadia Healthcare Company Inc ACHC: $35 price target
Finally, Credit Suisse named just one lone Underperform-rated stock in the space:
- Community Health Systems CYH: $3.50 price target
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