Aveanna Healthcare's (AVAH) earnings drivers include the continued execution of its preferred payer strategy, and efficiencies stemming from gains in its business segments and lower selling, general and administrative expenses, UBS said in a note Tuesday.

The company expects its "strong" earnings momentum to continue into 2026, despite Medicaid reimbursement headwinds as states face tightening Medicaid budgets under the Trump Administration's One Big Beautiful Bill, according to the note.

Aveanna's upbeat earnings performance year-to-date put the company on a path toward a reasonable leverage ratio, expected to be in the mid-4x range in 2026, UBS said.

The firm maintained its 2025 adjusted earnings before interest, taxes, depreciation and amortization estimate of $270 million, but raised its 2026 and 2027 estimates to $286 million and $316 million, respectively, from $272 million and $292 million.

UBS upgraded its rating on the stock to neutral from sell and raised its price target to $8 from $6.75.

Shares of Aveanna were up more than 3% in recent trading Tuesday.

Price: 7.28, Change: +0.24, Percent Change: +3.41