“We think the company is well positioned to benefit from attractive long-term demographic driven senior housing demand, over 20 percent accretion from Emeritus syngergies, which have not yet ramped given the ongoing integration, and strategic optionality given ownership of underfvalued real estate and an ongoing strategic review to unlock value,” analysts for the Goldman Sachs Group, Inc. wrote in a report released Monday.
Brookdale is the largest owner and operator of senior living communities throughout the United States. It is the only senior housing provider listed in the report that identifies areas of potential growth in the healthcare sector. Analysts speculated at least a 15 to 30 percent probability of a merger or acquisition for Brookdale, Anacore Pharmaceuticals Inc., Clovis Oncology Inc., Pacira Pharmaceuticals Inc., Sage Therapeutics Inc. and Evolent Health Inc.
No potential buyers were identified. A Brookdale spokesperson declined to comment on speculation.
Brookdale has come under pressure in recent months. The company has seen a decline in occupancy rates, which analysts attributed to this year’s flu season that “drove higher mortality, hospitalization and facility quarantines across the country.” The company experienced setbacks from its 2014 acquisition of Emeritus Corp. that have driven occupancy rates even lower than the industry and forced management to cut 2015 guidances by 10 percent. The company has also faced investor frustration around prospects of a value unlocking event increase.
“In our view, the recent pullback provides a very attractive entry point as we continue to forecast favorable long-term senior housing demand, and view short-term integration setbacks (and the negative impact on occupancy) as transient,” according to the report.
Brookdale adjusted sales and marketing missteps, and occupancy rates rose in July, the first monthly increase in almost a year. An increase is also expected for August.
In June, Goldman Sachs initiated coverage of Brookdale and issued the company a buy rating with a price target of $45.
Trading began at $27.45 today. The 52-week high of shares is $38.89 and the 52-week low is $26.30.