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Why Is Universal Health Services (UHS) Up 9.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Universal Health Services (UHS - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Universal Health Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Universal Health Q1 Earnings Top, Revenues Improve Y/Y

Universal Health delivered first-quarter 2021 adjusted earnings of $2.44 per share, which outpaced the Zacks Consensus Estimate by 13.5%. Moreover, the bottom line climbed 41% year over year.

The company’s results benefited from growing revenues, partially offset by elevated operating expenses.

While adjusted admissions on a same facility basis at the company’s acute care hospital services segment declined 12.1% year over year in the first quarter, the same for behavioral health care services segment fell 4.9% year over year.

Quarterly Operational Update

Net revenues improved 6.5% year over year to $3 billion primarily driven by uptick in revenues across the company’s acute care and behavioural health care facilities. Further, the company’s top line outpaced the Zacks Consensus Estimate by 2.8%.

Total operating expenses increased 4.8% year over year to $2.7 billion in the first quarter primarily due to higher salaries, wages and benefits, other operating expenses, supplies expense, depreciation and amortization, and lease and rental expense.

Segment Update

Acute Care Hospital Services

In the quarter under review, adjusted patient days on same facility basis slid 0.7% from the prior-year quarter. On same facility basis, net revenues stemming from the company’s acute care services improved 11.7% year over year.

Behavioral Health Care Services

Adjusted patient days on same facility basis plunged 3.8% year over year in the first quarter. Net revenues inched up 0.9% year over year during the quarter on same facility basis from the company’s behavioral health care services.

Financial Update

As of Mar 31, 2021, the company had cash and cash equivalents of $764.5 million, which plunged 37.6% from 2020 end.

As of Mar 31, 2021, total assets fell 2.8% from the 2020-end figure to $13.1 billion.

The company’s long-term debt was $3.5 billion, down 0.5% from the figure as of Dec 31, 2020.

During the first quarter, net cash provided by operating activities of $71.8 million decreased seven-fold year over year. This was primarily due to an unfavorable change stemming from repayments of Medicare accelerated payments, partly offset by a positive change arising from higher net income plus depreciation and amortization expense and stock-based compensation expense.

Share Repurchase and Dividend Update

Due to the COVID-19 pandemic induced market uncertainties, the company had temporarily suspended its share buyback activities and quarterly dividend payments. Nevertheless, management has recommenced its share buyback program with immediate effect in April 2021.

Notably, its board of directors had approved a first-quarter dividend of 20 cents per share, which had been paid on Mar 31, 2021 to shareholders of record as of Mar 15.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Universal Health Services has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Universal Health Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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