LHC Group, Inc. LHCG recently inked a definitive agreement with Orlando Health to form a new joint venture to improve home health and home and community-based services (HCBS) in the state of Florida. The joint venture will include six locations – three current Orlando Health providers and three current LHC Group providers in Orlando, Clermont, Kissimmee, and Altamonte Springs.

This is expected to boost LHC Group’s home and community-based business segment.

Orlando Health at a Glance

Orlando Health is a not-for-profit healthcare network based in Orlando. The system covers nine Florida counties, with nearly 450 locations that include 13 wholly-owned or affiliated hospitals and emergency departments; rehabilitation services, cancer centers, heart institutes, imaging and laboratory services, wound care centers, more than 300 physician offices for adults and pediatrics, and 11 urgent care centers in partnership with CareSpot Urgent Care.

More About the Deal

Notably, the joint venture agreement is expected to get finalized on Aug 1, subject to customary closing conditions, at which time LHC Group will purchase majority ownership and take over management responsibility. LHC Group expects additional annualized revenues from this joint venture of approximately $3.5 million and that it will not have any material effect on its 2020 diluted earnings per share.

This collaboration will result in the creation of the most convenient, responsive, high-quality and full continuum of care currently available for the community.

With this deal, LHC Group is optimistic with regard to expansion of the availability of in-home healthcare services in the state of Florida.

Other Developments

In January, LHC Group finalized the joint venture purchase and expansion agreements with partners in Texas, Arkansas, and Louisiana (all of which became effective on Jan 1, 2020). These transactions accounted for around $23.8 million in annualized revenues.

Market Prospects

Per Markets and Markets, the global home healthcare market is estimated to reach  $353.56 billion by 2022 from $237.05 billion in 2016, at a CAGR of 8.3%. Hence, this JV partnership is strategically-timed.

Price Performance

Over the past three months, the stock has gained 28.6% compared with the 6.9% growth of its industry.

Zacks Rank and Key Picks

LHC Group currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader medical space are Laboratory Corporation of America Holdings LH, Surmodics  SRDX and Quest Diagnostics DGX.

LabCorp’s long-term earnings growth rate is estimated at 6.1%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Surmodics’ long-term earnings growth rate is estimated at 10%. The company presently carries a Zacks Rank #1.

Quest Diagnostics’ long-term earnings growth rate is estimated at 7.6%. It currently carries a Zacks Rank #1.

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