On Monday, BofA Securities analyst Kevin Fischbeck upgraded Option Care Health (NASDAQ:OPCH), a $4.65 billion healthcare services provider, from Neutral to Buy and increased the price target from $26.00 to $33.00.
The upgrade followed the company's preannouncement of better than expected fourth-quarter results for 2024 and a 2025 EBITDA forecast that is slightly above consensus estimates. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.42, suggesting strong operational fundamentals.
Option Care Health's guidance suggests a year-over-year growth in EBITDA of 1-5%, which is more favorable than some analysts' expectations of a decline due to pressures on gross profit from Stelara. According to Fischbeck, the guidance indicates a core EBITDA growth of 18%, surpassing the long-term growth algorithm despite facing a larger impact from Stelara. The company has demonstrated strong revenue growth of 13.58% over the last twelve months, with management actively supporting shareholder value through aggressive share buybacks.
The analyst's decision to upgrade the stock is based on the belief that Option Care Health's core business remains strong, driven by factors such as an aging population, a shift toward lower-cost care settings, and the company's dominant market share. The increased visibility into the company's ability to manage the Stelara headwind contributed to the positive outlook.
Fischbeck adjusted the firm's model to reflect the fourth-quarter performance and the guidance for 2025. The new price objective of $33.00 represents a higher earnings multiple of 13.9 times the estimated 2025 adjusted EBITDA, up from the previous multiple of 11.0 times. This adjustment reflects the analyst's increased confidence in the company's earnings visibility.
In other recent news, Option Care Health announced its Q4 and 2024 financial projections, anticipating a significant increase in net revenue and net income. For Q4, net revenue is expected to be between $1.34 billion and $1.35 billion, while the full-year outlook predicts nearly $5 billion in net revenue. The company also announced the completion of a $90 million share repurchase and the approval of a new $500 million stock repurchase program.
Despite these positive developments, analysts from UBS, Goldman Sachs, and Truist Securities expressed concerns about potential financial impacts due to pricing adjustments for the drug Stelara. UBS initiated coverage with a neutral rating, Goldman Sachs downgraded the stock from Buy to Neutral, and Truist Securities lowered its price target to $34, maintaining a Buy rating.
Option Care Health is also considering strategies for capital deployment, including share repurchases and potential mergers and acquisitions. However, the company faces challenges such as IV bag shortages and changes in drug pricing due to the Inflation Reduction Act, expected to impact financial results in 2025.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.