By Dean Seal

Shares of Select Medical Holdings gained after analysts at RBC raised their price target on the stock in the wake of easing regulatory headwinds and an expected third-quarter profit boost.

The stock was up 11% at $14.49 in midday trading Wednesday. Shares are still down 23% since the start of the year.

"We see significant dislocation in [Select Medical] shares, marking an attractive entry point as regulatory headwinds lift," RBC analysts Ben Hendrix and Michael Murry said in a research note on Tuesday, lifting their price target to $20 from $16.

The analysts said the stock has been pressured by margin compression in the critical-illness recovery hospital segment after the Centers for Medicare & Medicaid Services sharply raised the threshold for special high-cost patient reimbursement in 2024 and 2025. That made it harder for Select Medical to get full reimbursement for more expensive cases it handled in long-term acute care facilities, the analysts said.

But the threshold increase for 2026 is much smaller at 2.5%, pointing to a more stable operating environment, according to the analysts.

Another issue weighing on the stock was a transmittal rule from the government that was creating headaches for cost reporting, particularly as labor costs normalized after the pandemic, the analysts said. the effective date, originally set for the fourth-quarter of last year, was moved to Oct. 1 of this year, reversing some headwinds previously recorded this year, and offering a boost to earnings in the quarter, according to the analysts.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

October 08, 2025 13:19 ET (17:19 GMT)

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