Surgery Partners, Inc. (NASDAQ:SGRY) is one of the 12 Stocks that Will Bounce Back According to Wall Street Analysts. On December 19, RBC Capital reiterated its Buy rating on Surgery Partners, Inc. (NASDAQ:SGRY) with a price target of $31 on the stock. The research firm believes that the company’s long-term growth prospects are still intact. Earlier, on December 18, Mizuho Securities reduced its price target on Surgery Partners, Inc. (NASDAQ:SGRY) from $22 to $19 but kept its Outperform rating on the shar ...

Surgery Partners (NASDAQ:SGRY) is one of the most promising mid-cap healthcare stocks under $50. On December 18, Mizuho Securities analyst Ann Hynes reiterated her Buy rating on Surgery Partners (NASDAQ:SGRY) stock. She has assigned a price target of $19, which leads to an upside of 21% from the current trading level. sfam_photo/Shutterstock.com Hynes’s bullish rating is backed by a positive 2026 forecast for managed care and health facilities. She highlighted that the managed care space is at the tail ...

Core Viewpoint - Surgery Partners, Inc. announced the pricing of $425.0 million aggregate principal amount of 7.250% senior unsecured notes due 2032, expected to close on December 16, 2025 [1] Group 1: Offering Details - The offering is part of a previously announced private offering exempt from the registration requirements of the Securities Act of 1933 [1] - The notes will be guaranteed on a senior unsecured basis by each domestic wholly-owned subsidiary of the Issuer that guarantees the Issuer's obligations under its senior secured credit facilities [1] - The notes will be issued as part of the same series as the $800.0 million of 7.250% senior notes due 2032 originally issued in April 2024 [1] Group 2: Use of Proceeds - Surgery Partners intends to use the net proceeds from this offering for general corporate purposes, including repaying outstanding borrowings under its revolving credit facility [2] Group 3: Company Overview - Surgery Partners is a leading healthcare services company headquartered in Brentwood, Tennessee, focused on providing high-quality, cost-effective surgical and related ancillary care [4] - Founded in 2004, the company operates more than 200 locations across 30 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices, and urgent care facilities [4]

Core Viewpoint - Surgery Partners, Inc. plans to offer an additional $425 million of its 7.250% senior unsecured notes due 2032 to support general corporate purposes, including repaying outstanding borrowings [1][2] Group 1: Company Overview - Surgery Partners is a leading healthcare services company focused on high-quality, cost-effective surgical and ancillary care solutions, operating over 200 locations across 30 states [4] - The company was founded in 2004 and has become one of the largest and fastest-growing surgical services businesses in the United States [4] Group 2: Financial Offering Details - The additional notes will be guaranteed on a senior unsecured basis by each domestic wholly-owned subsidiary of the Issuer that guarantees its obligations under senior secured credit facilities [1] - The notes will be part of the same series as the previously issued 7.250% senior notes due 2032, originally issued in April 2024 [1]

Core Insights - Surgery Partners, Inc. has announced a partnership with Baylor Scott & White Health to jointly own The Physicians Centre Hospital in Bryan, Texas, enhancing healthcare access in the Brazos Valley [1][3] Company Overview - Surgery Partners is a leading healthcare services company focused on high-quality, cost-effective surgical and ancillary care, with over 200 locations across 30 states [5] - Baylor Scott & White Health is the largest not-for-profit health system in Texas, serving over three million customers through 53 hospitals and more than 1,300 access points [6] Partnership Details - The partnership will allow patients to continue care with their current providers while the hospital will operate under the Baylor Scott & White name [1] - This joint venture aims to expand access to quality patient care and enhance services in the Bryan College Station community [3][4] - The facility will complement existing surgical care services in the Baylor Scott & White – College Station Region, providing a full continuum of surgical care [3] Service Offerings - The Physicians Centre Hospital is recognized for surgical excellence and offers a wide range of surgical options, including bariatric, orthopedic, and urologic surgeries, among others [2]

Company Overview - Surgery Partners, Inc. (NASDAQ:SGRY) operates surgical facilities across the United States, providing outpatient surgery, diagnostic imaging, and laboratory services, focusing on cost-effective surgical solutions [1] Price Targets and Analyst Ratings - Mizuho Securities set a price target of $22 for SGRY, indicating a potential upside of 44.74% from its current trading price of $15.20 [2] - Cantor Fitzgerald maintains an "overweight" rating with a price target of $36, while the Royal Bank of Canada has set a $31 target with an "outperform" rating [3] - Benchmark adjusted its price target for SGRY from $35 to $30, maintaining a "buy" rating, whereas Weiss Ratings reaffirmed a "sell (d-)" rating [4] Stock Performance and Trading Activity - SGRY's stock price has decreased to $15.06, a drop of 1.47% or $0.22, with fluctuations between $15.01 and $15.57 [2] - The stock has experienced a 52-week high of $26.16 and a low of $15.01, indicating its volatile nature [5] - There has been a significant surge in options trading activity, with a 498% increase in put options, suggesting investor uncertainty or hedging strategies [3][6] Market Capitalization and Trading Volume - The stock's market capitalization is approximately $1.95 billion, with a trading volume of 1,356,144 shares on the NASDAQ exchange [4]

Financial Performance - Total revenues for Q3 2025 increased by 6.6% to $821.5 million from $770.4 million in Q3 2024, driven by same-facility revenue growth and acquisitions [105]. - Adjusted EBITDA for Q3 2025 rose by 6.1% to $136.4 million compared to $128.6 million in Q3 2024, attributed to revenue growth and cost management initiatives [105]. - Patient service revenues increased by 6.0% to $798.5 million in Q3 2025 from $753.2 million in Q3 2024, supported by a 3.4% increase in same-facility case volumes [116]. - Revenues for the nine months ended September 30, 2025, increased by 7.7% to $2,423.7 million compared to $2,249.9 million for the same period in 2024 [125]. - Patient service revenues rose by 7.0% to $2,361.1 million for the nine months ended September 30, 2025, driven by a 5.4% increase in days adjusted same-facility revenues [125]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $369.3 million, an increase from $344.4 million in 2024 [145]. Costs and Expenses - Cost of revenues for Q3 2025 was $626.2 million, representing 76.2% of total revenues, compared to 77.0% in Q3 2024 [117]. - General and administrative expenses decreased to $22.4 million in Q3 2025 from $29.2 million in Q3 2024, accounting for 2.7% of revenues [118]. - Cost of revenues was $1,870.9 million for the nine months ended September 30, 2025, maintaining a consistent percentage of revenues at 77.2% [126]. - General and administrative expenses decreased to $94.5 million, representing 3.9% of revenues for the nine months ended September 30, 2025, down from 4.6% in 2024 [127]. Interest and Debt - Interest expense for Q3 2025 was $74.9 million, or 9.1% of revenues, up from $50.0 million and 6.5% in Q3 2024, due to increased borrowings [122]. - Interest expense, net increased to $205.0 million for the nine months ended September 30, 2025, accounting for 8.5% of revenues, up from 6.6% in 2024 [132]. - The total interest expense, net, is reported at $257.9 million, with transaction and integration costs at $89.4 million [152]. - The company utilizes a balanced mix of maturities and both fixed and variable rate debt to manage interest rate exposure [153]. - Interest rate swap and cap agreements are in place to mitigate exposure to interest rate fluctuations, with low credit risk associated with these agreements [153]. Acquisitions and Investments - The company acquired a controlling interest in four surgical facilities and five physician practices for $52.6 million during Q3 2025 [105]. - The impact of acquisitions and synergies is estimated at $43.6 million, as if each acquisition had occurred on October 1, 2024 [152]. - Net cash used in investing activities decreased significantly to $120.5 million for the nine months ended September 30, 2025, down from $376.8 million in 2024 [137]. Net Income and Loss - Net loss attributable to Surgery Partners, Inc. was $22.7 million in Q3 2025, an improvement from a net loss of $31.7 million in Q3 2024 [115]. - The company reported a net loss attributable to Surgery Partners, Inc. of $62.9 million for the nine months ended September 30, 2025, compared to a loss of $59.6 million in 2024 [125]. - Net income attributable to non-controlling interests was 5.5% of revenues for the nine months ended September 30, 2025, compared to 5.3% in 2024 [134]. Cash Flow - Cash flows from operating activities were $170.9 million for the nine months ended September 30, 2025, a decrease of $17.8 million from $188.7 million in 2024 [136]. - Cash flows from operating activities for the same period amount to $282.3 million [152]. - Changes in operating assets and liabilities, net of acquisitions and divestitures, contributed $123.5 million [152]. Payor Mix and Operations - The payor mix for Q3 2025 showed private insurance payors at 50.6%, government payors at 43.5%, and self-pay at 3.3% [111]. - The company operated a portfolio of 165 surgical facilities, including 146 ASCs and 19 surgical hospitals across 30 states as of September 30, 2025 [104]. Other Financial Metrics - Non-cash interest expense, net, is reported at $(7.9) million, while non-cash lease expense is $(38.8) million [152]. - The company expects no material effect on net earnings or cash flows in 2025 due to interest rate changes, based on current indebtedness and interest rate cap agreements [154]. - The company recognizes changes in the fair value of derivatives designated as cash flow hedges in other comprehensive income [153].

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Core Insights - Surgery Partners (SGRY) reported quarterly earnings of $0.13 per share, missing the Zacks Consensus Estimate of $0.19 per share, and down from $0.19 per share a year ago, representing an earnings surprise of -31.58% [1] - The company posted revenues of $821.5 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 0.31%, but up from $770.4 million year-over-year [2] - The stock has added about 1.6% since the beginning of the year, underperforming the S&P 500's gain of 14.4% [3] Earnings Outlook - The current consensus EPS estimate for the coming quarter is $0.46 on revenues of $940.87 million, and for the current fiscal year, it is $0.92 on revenues of $3.36 billion [7] - The estimate revisions trend for Surgery Partners was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Medical Services industry, to which Surgery Partners belongs, is currently in the top 38% of over 250 Zacks industries, suggesting that companies in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8] - Another company in the same industry, Auna S.A. (AUNA), is expected to report quarterly earnings of $0.20 per share, reflecting a year-over-year change of -23.1%, with revenues expected to be $330.33 million, up 8.7% from the previous year [9]

Financial Data and Key Metrics Changes - Net revenue for Q3 2025 was $821.5 million, reflecting a 6.6% year-over-year increase [4][17] - Adjusted EBITDA was $136.4 million, up 6.1% year-over-year, with an adjusted EBITDA margin of 16.6% [4][17] - Same facility revenue grew by 6.3%, with same facility case growth of 3.4% and rate growth of 2.8% [17][22] Business Line Data and Key Metrics Changes - Over 166,000 surgical cases were performed in Q3, representing a 2.1% growth, with significant increases in GI and MSK procedures [5][17] - Total joint surgeries in ASC facilities grew by 16% in Q3 and 23% year-to-date compared to the same period last year [5][17] - The payer mix showed commercial payers at 50.6% of revenues, down 160 basis points year-over-year, while governmental sources increased by 120 basis points [7][17] Market Data and Key Metrics Changes - The company observed softer-than-expected same facility volume growth in recent months, prompting adjustments to the fourth quarter outlook [7][15] - The revised guidance for full-year revenue is now expected to be in the range of $3.275 billion to $3.3 billion [12][21] Company Strategy and Development Direction - The company is focused on three growth pillars: organic growth, margin improvement, and capital deployment for M&A [4] - A strategic portfolio optimization process is underway to enhance flexibility and streamline operations, with a focus on divesting larger surgical hospitals [11][12] - The company plans to open two new DeNovo facilities in Q3, with nine under construction and more than a dozen in the development pipeline, primarily targeting higher acuity specialties [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged recent trends in surgical demand and payer mix, particularly among commercial patients, which have led to a more cautious outlook for Q4 [15][22] - The company remains confident in its long-term growth algorithm and the resilience of its business model despite near-term challenges [15][22] Other Important Information - The company has deployed approximately $71 million in capital for acquisitions in 2025 and anticipates a return to normal levels of annual capital investment moving into 2026 [8][9] - The cash balance at the end of the quarter was $203.4 million, with total available liquidity exceeding $600 million [18] Q&A Session Summary Question: What is causing the weakness in demand or procedure volumes as you think through Q4? - Management noted broad-based weakness in volumes and payer mix, with higher government payer mix than expected entering Q4, but still anticipates growth in cases and rates [24][25] Question: Is the low level of spend on acquisitions due to deal timing or evaluation? - Management confirmed strong deal flow but emphasized a disciplined approach to acquisitions, indicating that timing is a factor [26] Question: Can you elaborate on the payer mix commentary? - Management indicated that while there is always pressure from payers, the current issue is more about a weaker growth trend rather than systematic problems [30][31] Question: How do you expect free cash flow to land in Q4 and the year ahead? - Management refrained from providing specific guidance on free cash flow but noted strong operating cash flow and improvements in working capital [76][80] Question: What are the implications of the portfolio review process? - Management is focused on optimizing the portfolio to enhance cash flow and reduce leverage, with potential partnerships or divestitures being considered [55][60]