Sector Snap: Nursing home operator shares rise

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Associated Press, 01.27.09, 01:26 PM EST
Nursing homes won’t experience big cuts in Medicare reimbursement in 2009, a Citi Investment Research analyst said Tuesday in a note that boosted shares of assisted-living facility operators.

In a note to clients, analyst Gary Taylor said he no longer expects the Centers for Medicare and Medicaid Services to significantly revise reimbursement rules for nursing homes and rehab care providers at a meeting in April. Taylor upgraded shares of Sun Healthcare Group (nasdaq: SUNH – news – people ) Inc. to "Buy" from "Hold" and placed them on his "Top Picks Live" list of recommended stocks.

He also raised his rating on Skilled Healthcare Group (nyse: SKH – news – people ) Inc. to "Hold" from "Sell."

Sun Healthcare shares are down more than 40 percent since September, and Taylor said Wall Street is expecting severe cuts from CMS. But he said Sun Healthcare’s Medicaid revenue should increase in 2009. He thinks the company’s profit forecasts will be at least equal to analyst expectations.

According to Thomson Reuters, analysts expect Sun to earn $1.12 per share for the year. In afternoon trading, shares of the Irvine, Calif., company rose $1.45, or 14.5 percent, to $11.46.

Taylor wrote that the price of Skilled Healthcare stock reflects Wall Street’s low expectations. The shares gained 53 cents, or 6.7 percent, to $8.41.

Also on Tuesday, RBC Capital Markets started coverage of Sun with an "Outperform" rating.

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