Kindred Healthcare, Inc. (KND)

[ScovilleUnits]

Kindred Healthcare is a Zacks #1 Rank (strong buy) stock.

http://www.zacks.com/commentary/10115/Kindred+Healthcare,+Inc.

Kindred Healthcare, Inc. (KND)
By Tracey Ryniec

Feb 24, 2009

Kindred Healthcare, Inc. (KND), the healthcare provider, saw its hospital business jump in the fourth quarter as the company surprised on estimates by 47.37%. Kindred has beat estimates 3 out of the last 4 quarters by an average of 37.22%. KND is trading at 12x forward earnings.
Company Description

Kindred Healthcare provides healthcare in over 40 states at 655 locations, including 82 long-term acute care hospitals, 228 skilled nursing centers and contract rehabilitation services called Peoplefirst.

Revenue Jumped 5% in the Fourth Quarter

On Feb 19, Kindred Healthcare reported fourth-quarter 2008 earnings that surprised on Wall Street estimates by 47.37%. Net income rose 11% to $21.8 million from $19.6 million. Earnings per share were 56 cents compared 51 cents in the fourth-quarter of 2007. Analysts expected only 38 cents.

Revenue increased 5% to $1.1 billion compared to $1.0 billion in 2007. All three of the company's divisions saw gains in the quarter.

"In our hospital business, favorable rates and improved revenue mix resulted in better than expected operating margins in the period," said Paul J. Diaz, President and Chief Executive Officer.

"Our nursing centers continued to report stable operating results despite some softness in our Medicare volumes as we again executed on our plan of improving employee retention, our quality indicators and customer satisfaction levels."

"Peoplefirst Rehabilitation reported its eighteenth quarter of sequentially higher revenues as we further expanded our external customer base and improved our cost metrics," he added.

Improved Financial Position

Cash flows more than doubled to $142 million from $63 million in the year ago period. The company had $125 million in cash by the end of 2008. It also had $349 million in outstanding revolving credit borrowings as of Dec 31, 2008.

2009 Outlook

The company issued its 2009 earnings per share in the range of $1.35 to $1.45. Revenue is expected to be approximately $4.4 billion.

First-quarter earnings are forecast in the range of 40 cents to 50 cents per share.

Consensus Estimates Rise

Given the company's guidance, consensus estimates have been rising for the first quarter and full-year 2009.

First quarter earnings rose 2 cents to 41 cents per share in the last 7 days. Full-year 2009 earnings also increased by 2 cents to $1.39 in the last week, which is in the middle of the company's forecast.

Analysts expect 5-year earnings growth of 12.5%.

Value Fundamentals

Kindred Healthcare is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 11.6. KND has a price-to-book of 0.76.