Jefferies Lowering Price Target On Skilled Healthcare Group (SKH)

Jefferies & Co. is lowering its price target on shares of Skilled Healthcare Group SKH to $16 from $17, and it has a Buy rating on shares following earnings. In a note to investors, Jefferies writes, "Solid Q1 results highlight the success that SKH continues to have in adjusting to the RUG-IV payment system. While CMS's proposed FY12 SNF rule has put an overhang on SKH shares near-term, we expect the final rule to be less onerous. Maintain Buy/PT $16 (from $17). SKH's RUG-IV transition is going well. SKH's Q1 revenues increased 17.7% to $222.6MM (vs. consensus of $218MM). Of that increase, skilled nursing revenue rose 7.7%, to $182.3MM (vs. our estimate of $175.6MM), and benefited from an 8.5% increase in rate offset by a 1% decline in patient days. Medicare Part A day rates increased 16.1% y/y, to $577, while Medicare blended rates (Part A & B) increased 13.1%, to $630. Skilled mix rose 150 bps y/y, to 24.5% (vs. our estimate of 23.8%)." Shares of SKH gained 64 cents yesterday to close at $12.98, a gain of 5.2%.