Morgan Keegan Rates RehabCare Group As Outperform (RHB)

Morgan Keegan published a note, where it initiated an “outperform” rating on RehabCare Group (RHB); no price target was set. In the report, Morgan Keegan writes, “Our EPS estimate of $0.62 is $0.01 below the First Call consensus mean and equal to the consensus median. It compares to $0.43 a year ago.” Analysts expect RHB to deliver solid earnings growth by expanding its contract base and improving other operations. Analysts added, “We expect lower Hospital Rehabilitation Services revenues but higher margins compared to the seasonally slow first quarter, and higher Skilled Nursing Rehabilitation Services (SRS) revenues but lower margins compared to very high first quarter margins. We also expect an update on the company's expectations for SRS under the new Medicare RUG-IV system, for which rates were released last Friday. We project a 2% decline in SRS revenues and a 10% decline in divisional EBITDA in 2011.” Morgan Keegan recommends purchasing shares of RHB. Shares are currently trading at $21.14; up $0.46 on the day.