Healthways Upgraded By Barclays On Improved Operating Focus

Barclays upgraded the shares of Healthways, Inc. HWAY from an Underweight to an Equal-Weight rating. The brokerage also boosted the price target from $12 to $27, citing enhanced returns due to transformation.

Analyst Joshua Raskin pointed out that the company maintained a portfolio of different services in the health and wellness field. It has also been trying to meet every component of the healthcare sector. The company's leadership has undergone changes following a year-long tactical review.

"Going forward, the services offered and customers targeted are much more focused. The company could shed approximately 40 percent of its revenues in this transformation. Most importantly, in our view, the company was able to find a 'buyer' that took operating losses at what we estimate to be about 1x those losses (thought of another way — selling losses at 1x is similar to buying earnings at 1x)," the analyst said.

Related Link: Citi Sees Kadmon's Trials As "Risky," Initiates With Neutral Rating

Pointing out that several transformations have happened in the healthcare sector, Barclays thinks Healthways believes the new management is more focused for maintaining a better growth course. This was evident from the way the company is selling its services to realize sustained higher margins and returns.

Raskin expects adjusted EPS of $1.28 in the current year and $1.50 for next year. His price target was arrived at based on 18x his 2017 EPS estimate.

At time of writing this, shares of the company were seen up 3.29 percent to $25.72, but quickly retreated to $25.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!