On Tuesday, KeyBanc Capital Markets expressed a positive outlook for the Healthcare Services (NASDAQ:) sector for the year 2025.
The firm anticipates a dynamic year ahead, with hospitals likely to experience continued EBITDA tailwinds due to a favorable volume environment, increased Health Insurance Exchange (HIX) enrollment, and Medicaid Direct Primary Care programs (DPPs). However, the uncertain policy landscape under the Trump administration may still pose challenges to investor sentiment.
For Medicare Advantage (MA) Managed Care Organizations (MCOs), while elevated costs are seen as a hurdle, the MA funding situation is expected to improve in the first half of 2025, potentially leading to better visibility into margin recovery for 2026 and beyond.
KeyBanc favors stocks that benefit from patient volumes but also have some protection from policy changes. In particular, they believe Encompass Health Corp (NYSE:NYSE:), Addus HomeCare (NASDAQ:) Corporation (NASDAQ:ADUS), and Privia Health Group, Inc. (NASDAQ:PRVA) have the potential to steadily increase in value.
Moreover, KeyBanc has upgraded the stock rating of Acadia Healthcare (NASDAQ:) Company, Inc. (NASDAQ:ACHC) to Overweight, indicating a positive shift in perspective. The company, which has demonstrated strong financial health with an overall “GOOD” rating according to InvestingPro, has shown impressive momentum with a 13% gain in the past week.
With a current P/E ratio of 14.6x and revenue growth of 9% in the last twelve months, ACHC appears undervalued based on InvestingPro’s Fair Value analysis. UnitedHealth Group Inc. (NYSE:NYSE:) and Evolent Health Inc . (NYSE:NYSE:) are identified as stocks that could experience significant upward movements, supported by the prospect of earnings recovery post-2026.
The firm remains cautious on Evolent Health leading up to next week’s conference but suggests the stock could gain momentum following updates on payer contracts. In the report, KeyBanc has also revised price targets for HCA Healthcare Inc. (NYSE:NYSE:) and Tenet Healthcare Corporation (NYSE:NYSE:), signaling adjustments to their market expectations for these companies. The specific changes to the price targets, however, were not disclosed in the context provided.
For deeper insights into healthcare sector valuations and comprehensive analysis, InvestingPro subscribers can access detailed financial metrics, including Fair Value estimates and health scores for over 1,400 US healthcare companies through exclusive Pro Research Reports.
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