SGRY: Asset Divestitures And Acquisition Pipeline Will Drive Recovery Ahead

The analyst price target for Surgery Partners has decreased from $31 to approximately $27.91. Analysts cite lowered guidance due to slowing volume and payer mix trends, a delay in acquisitions, and a more cautious outlook for near-term growth.

Analyst Commentary

Following recent quarterly results and updated guidance, analysts have offered a mix of optimistic and cautious perspectives on Surgery Partners' valuation and growth prospects. Below, we outline the key bullish and bearish takeaways drawn from recent research notes.

• The M&A backdrop remains favorable, with a full acquisition pipeline expected to resume typical spending levels. This is seen as a positive driver for long-term growth.
• Long-term growth algorithms for same-store sales are viewed as intact, supporting the potential for recovery in adjusted EBITDA and profitability over time.
• Ongoing selective divestitures of surgical hospitals are expected to improve leverage and enhance free cash flow, making the company better positioned for future expansion.
• Despite current challenges, industry trends for Ambulatory Surgery Centers are viewed as long-term tailwinds, and current valuation is seen as depressed relative to the company’s fundamental prospects.

• Analysts have lowered near-term price targets in response to management’s reduced guidance, reflecting concerns around slowing procedure volumes and an unfavorable payer mix.
• The pace of mergers and acquisitions has slowed, with delays highlighted as a reason for cuts in expected performance in the near future.
• Operational challenges, including commercial volume pressures and uncertainty around the payer mix, have led to a more cautious outlook for both Q4 and fiscal 2025 growth execution.
• Recent cuts to future guidance have weighed on sentiment, with the investment case now hinging on successful asset divestitures and balance sheet deleveraging.

What's in the News

• Surgery Partners, Inc. announced earnings guidance for the full year 2025, projecting revenue between $3.275 billion and $3.30 billion (Corporate Guidance).

Valuation Changes

• Consensus Analyst Price Target has fallen from $31 to approximately $27.91, reflecting a notable decrease in perceived fair value.
• Discount Rate has risen from 7.67% to 8.42%, indicating increased risk assumptions or a more cautious outlook.
• Revenue Growth forecast has declined from 9.85% to 7.02%, pointing to more subdued expectations for top-line expansion.
• Net Profit Margin estimate has decreased from 3.83% to 3.12%, suggesting lower expected profitability.
• Future P/E multiple has increased from 30.6x to 36.5x. This may signal expectations for slower earnings growth or a higher valuation relative to forecasted earnings.