SGRY: Upcoming Divestitures And Deleveraging Will Drive A Constructive Reset In 2025

Surgery Partners price target has been revised lower, with analysts trimming expectations by mid single digit dollars per share to reflect weaker than expected recent performance, payer mix and volume pressures, slower M&A activity, and reduced near term earnings visibility, even as they highlight supportive long term fundamentals and a still constructive outlook on asset divestitures and deleveraging.

Analyst Commentary

Analysts are broadly revising models to reflect weaker near term trends, yet most still frame the stock as a valuation reset rather than a change in the long term thesis.

Bullish Takeaways

• Bullish analysts view the recent drawdown as overdone relative to the magnitude of the Q3 miss and still see upside as the long term same store growth algorithm remains intact.
• Several note that the M&A backdrop and deal pipeline remain favorable, with expectations that acquisition spending will normalize, supporting renewed procedural growth and scale benefits over time.
• There is continued confidence that planned asset divestitures and balance sheet deleveraging can unlock value and help re rate the equity multiple from currently depressed levels.
• Positive Affordable Care Act enrollment trends and structural tailwinds for ambulatory surgery centers are seen as supportive to long term volume growth and margin expansion, despite current noise.

Bearish Takeaways

• Bearish analysts are focused on employer sponsored coverage and commercial mix pressures, which are constraining visibility and weighing on near term earnings power.
• Slowing volume trends and a softer payer mix have led to cuts in FY25 guidance and reduced confidence in execution against prior growth targets.
• The near term impact of delayed acquisitions and a slower pace of M&A is viewed as a headwind to both growth and multiple expansion until activity clearly re accelerates.
• Some see the reset in adjusted EBITDA expectations, now closer to the midpoint of the long term algorithm, as limiting upside surprise potential in the next few quarters.

What's in the News

• Surgery Partners entered a new strategic partnership with Baylor Scott & White Health to jointly own The Physicians Centre Hospital, a 16-bed facility in Bryan, Texas. The facility will operate under the Baylor Scott & White name while Surgery Partners continues to manage daily operations (company announcement).
• The Physicians Centre Hospital partnership expands Surgery Partners’ surgical footprint in the Baylor Scott & White College Station Region, adding a wide range of bariatric, ophthalmologic, orthopedic, gastroenterological, spinal, urologic, and other surgical services to its network (company announcement).
• Surgery Partners issued 2025 earnings guidance, projecting full-year revenue between 3.275 billion and 3.30 billion dollars, framing expectations for top-line growth despite recent near-term headwinds (company guidance).

Valuation Changes

• Fair Value: unchanged at approximately 25.73 dollars per share, indicating no revision to intrinsic value assumptions.
• Discount Rate: risen slightly from about 8.33 percent to roughly 8.52 percent, reflecting a modest increase in perceived risk or required return.
• Revenue Growth: effectively unchanged at approximately 6.85 percent, suggesting stable expectations for top line expansion.
• Net Profit Margin: effectively unchanged at about 3.00 percent, indicating stable profitability assumptions.
• Future P/E: risen slightly from roughly 36.12 times to about 36.30 times, implying a marginally higher valuation multiple on forward earnings.