It has been about a month since the last earnings report for Universal Health Services (UHS Quick QuoteUHS - Free Report) . Shares have added about 3% 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 drivers.

Universal Health Q3 Earnings Miss Mark, Decline Y/Y

Universal Health reported third-quarter 2021 adjusted earnings of $2.67 per share, which missed the Zacks Consensus Estimate by 4.3%. The bottom line decreased 7.3% year over year.

Results were hurt by escalating expenses and a weak performance by its Behavioral Health Care Services segment.

While adjusted admissions on same facility basis at the company’s Acute Care Hospital Services segment climbed 12.4% year over year in the third quarter, the same for Behavioral Health Care Services segment dipped 2.7% year over year.

Quarterly Operational Update

Net revenues of $3.2 billion improved 8.3% year over year. The top line met the consensus mark.

Total operating costs rose 10.9% year over year to $2.8 billion in the second quarter, mainly due to increased salaries, wages and benefits, other operating expenses, supplies expense, depreciation and amortization.

Segmental Update
Acute Care Hospital Services

On same facility basis, adjusted patient days increased 10.9% year over year in the third quarter. Net revenues improved 13.1% year over year in the quarter on same facility basis from the company’s acute care services.

Behavioral Health Care Services

In the quarter under review, adjusted patient days on same facility basis slid 2.1% year over year. Net revenues drawn from the company’s behavioral health care services inched up 2% year over year.

Financial Update (as of Sep 30, 2021)

Universal Health exited the third quarter with cash and cash equivalents of $190 million, down 84.5% from the level at 2020 end.

The company had no borrowings outstanding and $1.196 billion of available borrowing capacity, net of outstanding letters of credit.

Total assets of $12.8 billion fell 4.7% from the figure as of Dec 31, 2020.

The company’s long-term debt totaled $3.7 billion, which increased 5.3% from the 2020-end level.

During the first nine months of 2021, net cash provided by operating activities of $562 million plunged 74.7% from the year-ago comparable period’s figure.

This was mainly due to an unfavorable change stemming from the repayments of Medicare accelerated payments, unfavorable change in accounts receivable and accrued and deferred income taxes, etc.

Share Repurchase Update

In the third quarter, the company bought back 2.78 million shares worth $419.1 million.

As of Sep 30, 2021, the company had an aggregate stock buyback plan of $3.7 billion, which was originally approved by its board of directors in various increments since 2014.


 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -6.22% due to these changes.

VGM Scores

At this time, Universal Health Services has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

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