Oppenheimer Upgrades Amedisys To Outperform, Sets $40 Target

Oppenheimer on Monday issued a report on Amedisys Inc (NASDAQ: AMED) amid signs that the company may be undervalued. The firm upgraded Amedisys from Perform to Outperform and issued a $40 price target.

Analysts Michael Wiederhorn and Matt Nirenberg wrote, "We are upgrading the shares of Amedisys... as the recent weakness in share price, the improved outlook under the new management team, and the stability of industry reimbursement make the stock more attractive, in our view. Furthermore, the company's increased appetite for M&A, strong cash flow, focus on its cost structure and outperformance with the increasingly important Star Ratings should also position Amedisys for improved success in the future."

Analysts at Oppenheimer noted two points that have the potential to drive the value of Amedisys' shares higher:

1. Medicare Reimbursement

Oppenheimer highlighted that reimbursement outlook remains stable, which is important because Medicare reimbursement remains a core driver of the company's revenues and profits. While industry rates are expected to be reduced by 1.4 percent in 2016, by 2018 analysts expect rates will remain flat and avoid volatility.

2. Financial structure

Oppenheimer analysts like Amedisys' clean balance sheet and strong cash flow heading into 2016. Furthermore, Amedisys has the potential to further expand margins by cutting costs and increasing the efficiency of their business operations, particularly as the home care industry may be heading toward consolidation.