Ahead Of The Bell: Skilled Healthcare

NEW YORK (AP) — A Jefferies & Co. analyst on Monday recommended investors buy shares of a nursing facility operator Skilled Healthcare Group Inc. citing better reimbursement, an improving economy, and a belief that investor sentiment is improving.

Jefferies analyst Arthur I. Henderson boosted his recommendation to "Buy" from "Hold" and increased his price target to $10 from $8.50, in a note to investors.

"While we remain cognizant of the challenges Skilled Healthcare faces, particularly the economy-related drop that we saw in its second-quarter Medicare census and the risks associated with health care reform, we now believe those concerns are more than adequately priced in and see limited downside risk from current levels," he said.

He also said that a mix of stabilizing economic conditions, profit results, and a better outlook on reimbursement will result in renewed investor interest.

"On the reimbursement front, the road to health care reform remains long and potentially treacherous, but our confidence that the outlook is going to be more favorable than we once thought, and modeled, is increasing," he said.

He also boosted his 2010 earnings-per-share expectations to 91 cents from 86 cents, citing the outlook for a better reimbursement environment. Analysts surveyed by Thomson Reuters, on average, expect 2010 profit of $1 per share.

Shares of Skilled Healthcare, which is headquartered in Foothill Ranch, Calif., closed at $8.11 Friday.