Echelon Wealth Partners upgraded Extendicare (TSX:EXE) to “buy” from “hold” but kept its price target at $9 after the company reported fourth quarter results. The stock closed at $7.85 (Canadian) on March 2.
Analyst Doug Loe writes that fourth quarter EBIDTA was close to his $23.5-million forecast and was achieved through a “combination of nursing home operational strength exceeding our expectations, but then offset by home healthcare services weakness and modest sequential decline in retirement residences operating income that did not.”
Mr. Loe said his model assumes that home healthcare margin softness should be in the rear-view mirror by the second half of 2020, based in part on discontinuation of unprofitable home healthcare operations in British Columbia by the end of the first quarter and also from eliminating costs ascribed to a firm-wide IT/enterprise platform for managing home healthcare service volumes.
“Sustained nursing home strength and home healthcare margin [are expected to] ricochet off 2019 trough levels [and] create imminent buying opportunity for stable dividend-bearing stock,” he added.
