Aveanna Healthcare Soars 11.36% on Jefferies Upgrade

Aveanna Healthcare's stock surged by 11.36% in pre-market trading on July 21, 2025, marking a significant rise that has caught the attention of investors and analysts alike.

Jefferies recently upgraded Aveanna Healthcare from a Hold to a Buy rating, setting a revised price target of $6, slightly down from the previous $6.25. This upgrade comes as the company prepares to release its second-quarter earnings report. Jefferies anticipates strong underlying performance and potential earnings surprises, driven by Aveanna's efforts to expand capacity and improve reimbursement terms with payer contracts.

The recent decline in Aveanna's stock, triggered by home nursing rate adjustments, may have been disproportionate. This is because the Medicare home health segment represents only a minor part of Aveanna's overall operations. The analysis implies that investors may have overreacted to the news, presenting a potential opportunity for buyers.

In the first quarter of 2025, Aveanna Healthcare reported a 14% increase in revenue, reaching approximately $559 million. The company achieved a 93.1% increase in adjusted EBITDA, primarily due to improved payer rates and cost-saving initiatives. Aveanna successfully executed five rate enhancements for its Private Duty Services (PDS) segment and added two new preferred payer agreements, increasing the total to 24, which now account for 54% of PDS Managed Care Organization volumes.

However, the labor environment remains a primary challenge for Aveanna, impacting its growth trajectory. Volume growth is expected to be muted this year, despite improvements in clinical outcomes and customer satisfaction. The company faces ongoing wage pressures and labor market challenges, affecting its cost of labor and gross margin metrics. Aveanna anticipates a relatively muted year for government affairs rate increases, with expectations to achieve ten state rate improvements. The company's free cash flow was negative $12.9 million in Q1, reflecting the seasonal low point for operating and free cash flows.