Connect with us


Following Post-Spinoff Comedown, The Pennant Group May Be Poised For Comeback

Since its spinoff from The Ensign Group (Nasdaq: ENSG), The Pennant Group Inc. (Nasdaq: PNTG) has but to unlock the upside of its residence well being and hospice companies.

That could quickly change, in accordance with each trade insiders and its present president and future CEO – Brent Guerisoli – who informed Home Health Care News he’s excited in regards to the prospects of the corporate’s residence well being enterprise.

Pennant got here out of the spinoff from Ensign with momentum in each its residence well being and hospice companies.

“This was reflected in substantial revenue and earnings upside relative to sell-side analyst expectations in its first few quarters as a public company, driven by strong organic growth, compelling operating execution and converting on an attractive [home health and hospice] deal pipeline,” Scott Fidel, a managing director on the personal funding banking firm Stephens, informed HHCN.

The Eagle, Idaho-based Pennant is a holding firm of impartial working subsidiaries, with a community that features 89 residence well being and hospice businesses and 48 senior residing communities positioned all through 14 states.

Still, Pennant was unable to latch onto its preliminary success. Like most of its trade friends, the corporate confronted challenges that had been introduced on by the pandemic.

“Unfortunately, as the pandemic became more embedded in Pennant’s core geographic markets, this created operational challenges for the company, particularly as it relates to the integration of recently acquired [home health and hospice] assets, which tended to have less developed operating models and profit margins than Pennant’s more mature operations,” Fidel stated.

Last yr, the corporate’s management opened up in regards to the many headwinds Pennant has been up in opposition to.

In addition to COVID-19 associated disruption, Pennant’s management revamp of its senior residing section, excessive quantity of residence well being and hospice offers and its focus and funding in new enterprise ventures had been all contributing elements within the firm’s incapacity to function on the beforehand set commonplace.

But in 2022, Pennant started to point out improved enterprise efficiency throughout its residence well being, hospice and senior residing segments. And extra not too long ago, the corporate’s inventory has been performing nicely.

“Investors have been betting on The Pennant Group because of its solid estimate revisions, as evident from the stock’s 25.2% gain over the past four weeks,” Zacks Equity Research wrote earlier this month. “As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.”

Earlier this month, Pennant announced that Daniel Walker, the corporate’s CEO, would step down from the function. Guerisoli will formally take the helm on Aug. 1.

As Guerisoli steps into his new function as CEO, executing Pennant’s strategy of buying community-driven businesses with robust ties to their particular markets, and empowering native leaders, stays as necessary as ever.

“A lot of what we’re doing now is creating more structure around the frameworks, around their systems, around their processes,” Guerisoli informed HHCN. “That foundation is so critical because that’s what we build from. If we can do that in the right way, we are going to create a significant opportunity for future partners that are going to join the organization, and future patients and residents.”

Guerisoli is the primary to confess that the house well being working atmosphere has been powerful, and whereas some challenges have begun to barely alleviate, many stay. Those embody labor pressures, inflation and the potential affect of the proposed fee rule.

“The proposed home health rule issued by CMS has cast a dark cloud of uncertainty around the outlook for the broader Medicare home health industry in 2023,” Fidel stated. “As a result, it will be critical to see whether CMS substantially moderates its draconian proposal when it issues the final regulation later this year, to help us ascertain whether Pennant will be able to unlock more of the embedded upside from its home health and hospice businesses for its shareholders in 2023 and beyond.”

That stated, Guerisoli has zeroed-in on a lot of potential tailwinds.

“Really what we’re seeing is that those operators that understand how to create real quality outcomes, in an efficient manner, are going to be rewarded [under HHVBP],” he stated. “I think we’re transitioning to the right model. This is what we’ve needed to do for a long time.”

Broadly, Guerisoli believes that modifications in reimbursement creates stress for suppliers to carry out. This is, in flip, a win for corporations like Pennant.

“Because of some of those operators that maybe aren’t as strong — there’s going to be opportunities for organizations like ours to really grow in a meaningful way,” he stated. “When we got started back in 2010, we saw successive reimbursement cuts for years. In that same period of time, we grew significantly.”

As far as falling wanting investor expectations prior to now, Guerisoli acknowledged they don’t at all times paint the total image.

“Investor expectations, sometimes that can be a tricky discussion,” he stated. “What I mean by that is, we’re focused on the long-term. We’re not going to grow really quickly because we’re trying to meet some sort of investor expectation or demand. We know who we are, we know what our model is and who our shareholders are. I mentioned building that foundation, that’s what we’re doing.”

It’s understanding and leaning into its enterprise mannequin that would be the key to the corporate’s turnaround, in accordance with Guerisoli.

“Because of the preparations that have been taking place over the course of the last several years, we’re in a position that going forward we’re going to have significant opportunity,” he stated. “Then you can couple that with what appears to be a strong, opportunistic acquisition landscape.”

Source link