NEW YORK (TheStreet) -- Brookdale Senior Living's (BKD) stock rating was reduced to "underperform" from "neutral" at Bank of America/Merrill Lynch today based on the company's lower-than-expected 2016 third-quarter results, reported before yesterday's market open.
The firm also cut its price target to $12 from $20 on shares of the Brentwood, TN-based operator of senior residences, according to TheFly.
BofA/Merrill Lynch analysts believe new construction and pressures in labor costs will make it challenging for Brookdale to grow in the near term. The pressures are likely to last longer than expected, the firm added.
RBC Capital Markets analysts also believe Brookdale's third-quarter miss was due to increased competitive pressures and costs.
The firm lowered its stock rating to "outperform" from being a "top pick" and decreased its price target to $15 from $25.
"We believe the stock has found its floor, but we do not expect the market to be that generous with multiple expansion until the fundamental operating trends show tangible improvement and management can beat their guidance, along with the majority of the downsizing transactions completed," the firm said in an analyst note.
Additionally, Wells Fargo downgraded Brookdale's stock rating to "market perform" from "outperform," based on Brookdale's lower full-year guidance, TheFly reports.
Brookdale cut its 2016 revenue guidance to be between $4.15 billion and $4.20 billion, down from $4.20 billion to $4.30 billion.
Shares of Brookdale were gaining in mid-afternoon trading on Wednesday.
More than 11.89 million Brookdale shares have traded so far today vs. the 30-day average of 3.17 million.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
The team rates Brookdale Senior Living as a Hold with a ratings score of C-. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, the team also finds weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself.