JP Morgan Comments On Kindred Healthcare Following Solid Earnings

After the close, Kindred Healthcare KND reported adjusted 1Q11 EPS of $0.65 compared to JP Morgan's estimate of $0.42 excluding approximately $0.10 in expenses related to the pending RHB transaction. EBITDAR in the quarter was $171.3mm as revenue was $24.8mm above JPM's outlook and $7mm above consensus. Against JP Morgan's outlook hospital revenue was $35.9mm above on better volumes and health services were $14.1mm light while rehab was $5.1mm above JPM's outlook. EBITDAR margins at 14.4% were 80bps above JPM's view as virtually every expense line came in better: SWB, supplies and other operating expenses. JP Morgan is raising its '11 and '12 EPS estimates to $2.25 and $2.60, up $0.25 and $0.05 from prior estimates following the quarter. Its EBITDAR estimates, which assume a June 30 close are now $786mm and $957mm compared to prior estimates of $775mm and $950mm. JP Morgan also now includes somewhat higher financing cost in its EPS estimates. JP Morgan has a $30 PT and Overweight rating on KND KND closed Monday at $24.23