EXE stock wins price target raise at Leede Jones Gable

Its fourth quarter results are in the books and Leede Jones Gable analyst Doug Loe is feeling more bullish about Extendicare (Extendicare Stock Quote, Chart, News, Analysts, Financials TSX:EXE).

On March 7, EXE reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $28.7-million on revenue of $350.2-million.

“Our strong fourth quarter is the result of the strategic initiatives we have undertaken to reposition Extendicare for growth and value creation,” said CEO Dr. Michael Guerriere. “This is the first quarter where we see the full financial impact of the Revera and Axium transactions. We also acquired a Revera redevelopment project through our joint venture with Axium, the first in a pipeline of up to 29 projects for which we have offer rights. We are also benefiting from cost management efforts and rate increases, as home care and LTC margins return closer to historical norms. This, coupled with the robust growth we delivered in the home care and managed services segments over the last five quarters, validates the compelling market opportunity emanating from the growing demand for seniors’ care.”

Loe said this report marks a return-to-form for EXE.

“Extendicare’s longer-term history in eldercare services reveals that FQ423 strength is more of a return to pandemic-free operating excellence than the emergence of new standards for the firm,” he wrote. “While on the topic of historic context, what is apparent to us in retrospect, as our graphical depictions of Extendicare’s trailing division-specific operating income/margin reveals (Exhibits 3-6) just how stable Extendicare’s operating margins were during the F2016-to-F2019 period actually were, before pandemic logistics compressed achievable operating income in nursing care and home healthcare operations specifically. While mitigating infectious disease symptomology will always be a frontline initiative for Extendicare or any eldercare services provider, it appears from recent quarters that the firm has ably restored conventional operations and our model assumes that historic operating performance can be the rule and not the exception during our F2024-to-F2026 forecast period.”

In a research update to clients March 11, Loe maintained his “Buy” rating but raised his price target on EXE from $7.25 to $8.50, implying a return of 24.9 per cent at the time of publication.

Loe thinks EXE will post EBITDA of $95.2-million on revenue of $1.29-billion in fiscal 2024. He expects those numbers will improve to EBITDA of $98.7-million on a topline of $1.32-billion the following year.