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Civitas Solutions (CIVI) to Acquire Habilitative Services

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Civitas Solutions, Inc. (CIVI - Free Report) recently announced that it has entered into an agreement to acquire Habilitative Services, Inc. The target company provides services to individuals with intellectual and developmental disabilities in the state of Minnesota.

Coming back to the news, we feel that the acquisition is a smart move on the part of the company. Habilitative Services operates in 22 counties in Minnesota. It provides a continuum of residential and periodic services. Habilitative Services supports approximately 360 adults in 86 residential sites and another 180 individuals in periodic programs. With more than 1,100 employees, Habilitative Services generated revenues of approximately $32.8 million for the 12-month period ending May 2017.

The transaction is however subject to a number of closing conditions, including the expiration of a regulatory notice period. The parties expect to close the transaction within 30-45 days.

Over the past three months, Civitas Solutions has outperformed the broader industry. The stock has gained 13.7%, compared with only 3.9% rise of the industry it belongs to.

Civitas Solutions is a leading national provider of home and community-based health and human services to individuals with intellectual, developmental, physical or behavioral disabilities and other special needs.

Going forward, we are encouraged by the company’s progress in Post-Acute Specialty Rehabilitation Services (SRS) and Adult Day Health (ADH) services, two of its fastest growing businesses. Moreover, the company is witnessing steady contributions from its strategy to grow organically and through acquisitions. Also, even though the company seems to be implementing its cost restructuring program efficiently, weak margins may continue to mar its financials.

Also, the company recently slashed its 2017 guidance. Civitas Solutions lowered the high end of its fiscal 2017 revenue guidance. The company projects revenues in the range of $1.48-$1.49 billion, lower than the previous range of $1.48-$1.52 billion.

Zacks Rank & Stocks to Consider

Civitas Solutions has a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader medical sector are Edwards Lifesciences Corp. (EW - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Cogentix Medical, Inc. (CGNT - Free Report) . Notably, Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while IDEXX Laboratories and Cogentix Medical have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences delivered an average earnings beat of 10.8% over the trailing four quarters. The company has a long-term expected earnings growth rate of 15.2%.

Cogentix Medical registered a positive earnings surprise of 200% in the last reported quarter. The stock represented a stellar return of 100.9% over the last one year.

IDEXX Laboratories delivered an average earnings beat of 9.3% over the trailing four quarters. It has a long-term expected earnings growth rate of 19.8%

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