(Reuters) - Proxy advisory firm Glass Lewis said on Thursday Enhabit shareholders should elect three AREX Capital Management director candidates to the nine-member board.

It advised choosing AREX nominees Maxine Hochhauser, Mark Ohlendorf and Gregory Sheff, according to its report seen by Reuters.

"There is a valid case to be made for supporting at least incremental change to the company's board, given the company's financial underperformance relative to its closest peers, the company's missteps in the strategic review process and the relevant experience and expertise of the dissident nominees," the report said.

The recommendation comes days after Glass Lewis' bigger rival Institutional Shareholder Services (ISS) said shareholders should elect three AREX director candidates.

Together ISS and Glass Lewis often influence how investors vote on proposed mergers and who serves on a company's board.

Shareholders will vote on July 25 unless the two sides reach an agreement beforehand.

AREX has been asking investors to replace seven directors to help reverse poor financial performance at the two-year-old company.

It has also been pushing the home health and hospice provider to put itself up for sale as its stock price has dropped 61% since it became a standalone company. In the last five days, the stock price has climbed nearly 10%.

The company, which is urging shareholders to elect all nine of its directors, decided earlier this year to remain an independent company.

It earlier this week said second-quarter profit could be in the range of $24.5 to $25.0 million when it reports results next month.

It reported adjusted earnings before interest, taxes, depreciation and amortization of $25.3 million in the first quarter.

AREX, which owns a 4.9% stake in Enhabit ( EHAB ), is backing CEO Barbara Jacobsmeyer and director Barry Schochet for re-election.

Schochet joined the board last year when the company reached an agreement with investors Cruiser Capital and Harbour Point Capital Management in March 2023.

(Reporting by Svea Herbst-Bayliss; Editing by Arun Koyyur)