RehabCare Is Set for a Booster Shot
By Mara Der Hovanesian
Hospitals and nursing homes are coming up empty-handed in their search for good help. The nursing shortage--expected to become more acute as the population ages--has boosted business for RehabCare Group (RHB ), a national provider of temporary health-care staff. The St. Louis company has grown through "deft acquisitions" in 1998 and 1999, according to J.P. Morgan Chase's Matthew Ripperger. He started covering RehabCare on Aug. 2, with a "long-term buy" rating and a 57 price target. The stock now trades at 40.
A revamped system for Medicare reimbursements next year could provide a new catalyst for growth. The new system will cap reimbursements to hospitals and nursing homes, putting a squeeze on facilities to cut costs. RehabCare's in-patient and out-patient program management division stands to gain.
Still, Wall Street has been hard on the stock, which is down 23% so far this year: While the company reported a 41% rise in second-quarter profits, or 43 cents per share, over the past year, it warned on July 31 that future 2001 earnings will be at the low end of consensus estimates. The stock fell 12% that day, just two weeks after hitting a 52-week peak. Judith Scott of investment firm Robert W. Baird, however, reiterated her "strong buy" rating and says the pullback is a buying opportunity. Her target is 53.
Gene Marcial is on vacation.