Brookdale Senior Living Faces Potential Summer Operating Cost Challenges: Analyst

RBC Capital Markets analyst Ben Hendrix reiterated a Sector Perform rating on Brookdale Senior Living Inc. BKD, with a price target of $7.

Hendrix remains somewhat cautious about the potential for high mid-to-late summer operating costs related to extreme heat in certain parts of the U.S. this summer, similar to last year's 3Q. 

BKD released its monthly occupancy report for June, with a weighted average occupancy of 76.8%, up 160 bps Y/Y (+20 bps sequentially from May).

The analyst decreased the 2Q23 adjusted EBITDA estimate to $74.2 million (from $75.3 million) on revenue of $748.5 million (previously $751.3 million) to reflect June and 2Q occupancy results.

Diluted EPS for 2Q is expected to be ($0.20) loss.

Hendrix also adjusted the full-year EBITDA estimate to $313.8 million (from $320.3 million), which better reflects BKD's recent sale of its last entry-fee community (comprising approximately 300 units).

The analyst sees significant operating leverage potential on the occupancy ramp and improving labor trends for BKD. 

For FY23, the analyst expects net revenue growth of 6.9% Y/Y to $3.02 billion. 

BKD’s business model parallels social impact-focused investing themes through its role in providing quality, compassionate senior care to the growing elderly population, the analyst adds.

Price Action: BKD shares are trading lower by 11.2% to $3.8250 on the last check Wednesday.