NEW YORK - In a recent development, Glass, Lewis & Co., a prominent independent proxy advisory firm, has recommended that shareholders of Enhabit, Inc. (NYSE:EHAB) vote in favor of three director nominees proposed by AREX Capital Management, LP at the company's upcoming Annual Meeting on July 25, 2024.
AREX, which owns approximately 4.9% of Enhabit's outstanding shares, has nominated Maxine Hochhauser, Mark W. Ohlendorf, and Dr. Gregory S. Sheff to bring fresh perspectives and relevant expertise to the board.
The endorsement from Glass Lewis follows a similar recommendation from Institutional Shareholder Services Inc., marking a significant push for boardroom change at Enhabit. Glass Lewis cited the company's financial underperformance relative to its peers and strategic review process missteps as reasons for supporting the change.
The firm emphasized the lag in total shareholder return (TSR) behind industry peers and the potential benefits of the nominees' relevant experience.
AREX's managing partners, Andrew Rechtschaffen and James T. Corcoran, have expressed their appreciation for the recognition of the need for industry-specific experience on Enhabit's board. They remain open to dialogue with the company to find a resolution that serves the interests of all shareholders.
In their push for boardroom renewal, AREX is urging shareholders to vote for all seven of its nominees, stating this will ensure the board has the necessary expertise to oversee management and drive operational improvements for shareholder value creation.
The investment firm, known for its value-oriented and long-term investment approach, has also made available a comprehensive plan for Enhabit's turnaround on their website.
This recommendation by Glass Lewis adds to the mounting pressure on Enhabit to consider significant changes at the governance level to address its performance issues and align the company more closely with shareholder interests. This news is based on a press release statement from AREX Capital Management.
In other recent news, Enhabit Home Health & Hospice has reported promising Q2 preliminary results, including a projected Adjusted EBITDA of $24.5 million to $25.0 million, and a significant $15 million reduction in bank debt. The company has also seen a shift in its non-Medicare visits, with 43% now under payor innovation contracts at improved rates.
Enhabit's management has expressed satisfaction with the recent performance, pointing to a 6.4% year-over-year increase in home health admissions and a fifth consecutive month of growth in the average daily census for the hospice segment.
In the face of a proxy contest initiated by AREX Capital Management, Enhabit has urged shareholders to vote for its recommended slate of nine nominees. AREX, a significant shareholder, has proposed a complete overhaul of Enhabit's board, nominating seven new directors in a bid to improve the company's governance and operational performance. Still, Enhabit contends that AREX's nominees lack the necessary industry-specific experience.
The company has also received support from Institutional Shareholder Services (ISS) for most of its director nominees ahead of the Annual Meeting of Stockholders. Despite this, Enhabit expressed disagreement with the ISS recommendation concerning three of its directors, emphasizing their value in finance, healthcare, and human resources.
These are recent developments that have been shaping the course of Enhabit, Inc.
InvestingPro Insights
In light of the recent recommendations for board changes at Enhabit, Inc. (NYSE:EHAB), investors are closely observing the company's financial metrics to gauge the potential impact of these proposed changes.
According to the latest data from InvestingPro, Enhabit's market capitalization stands at $486.01 million, reflecting the scale of the business in the eyes of the market. Moreover, the company's revenue for the last twelve months as of Q1 2024 was reported at $1043.6 million, with a gross profit margin of 48.52%, indicating a solid foundation in its operational execution.
Despite these positive indicators, Enhabit has faced challenges, as highlighted by a negative price earnings (P/E) ratio of -5.53, which suggests investor concerns about the company's profitability in the near term. This is further emphasized by the adjusted P/E ratio for the same period, which stands at a more pronounced -33.08.
Nevertheless, there is a silver lining—InvestingPro Tips indicate that analysts expect Enhabit's net income to grow this year, and the company is predicted to become profitable within the year, which could signal a turnaround in its financial health.
InvestingPro also highlights that Enhabit does not currently pay a dividend, which may be a point of consideration for income-focused investors. However, those looking for growth potential might be encouraged by the company's expected return to profitability.
For investors seeking a deeper dive into Enhabit's prospects, InvestingPro offers an array of additional tips—there are currently 4 more tips available which can be accessed by visiting https://www.investing.com/pro/EHAB. To gain full access to these insights, readers can use the promo code PRONEWS24 to receive up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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