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Select Medical (SEM) Q4 Earnings Beat on Higher Admissions

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Select Medical Holdings Corporation (SEM - Free Report) reported fourth-quarter 2021 adjusted earnings of 37 cents per share, which outpaced the Zacks Consensus Estimate by 27.6%. However, the bottom line plunged 35.1% year over year.

SEM’s quarterly results benefited from strong top-line growth, courtesy of solid segmental contributions. An uptick in patient admissions at the Critical Illness Recovery Hospital and the Rehabilitation Hospital segments coupled with increased visits in the Outpatient Rehabilitation and the Concentra segments contributed to the upside. However, the improvement was partly offset by escalating costs.

Net operating revenues amounted to $1.6 billion, which improved 6.8% year over year in the fourth quarter. The top line surpassed the consensus mark by a whisker.

Total costs and expenses of $1.5 billion rose 11.9% year over year due to a 12.5% and 7.7% rise in cost of services, and general and administrative expenses, respectively.

Adjusted EBITDA fell 37.5% year over year to $138.4 million in the quarter under review.

Segmental Update

Critical Illness Recovery Hospital

The segment’s operating revenues totaled $577.2 million, which advanced 7.3% year over year, attributable to a 3.2% increase in patient days. Adjusted EBITDA tumbled 67.3% year over year to $24.6 million.

Rehabilitation Hospital Segment

Operating revenues of the segment grew 10.5% year over year to $216.4 million in the fourth quarter. The improvement can be attributed to 8.1% growth in patient days. Adjusted EBITDA of $39.3 million declined 7.3% year over year.

Outpatient Rehabilitation

The segment reported operating revenues of $277.5 million, which improved 7.8% year over year in the quarter under review, driven by a 9.2% rise in patient visits. Adjusted EBITDA dipped 0.4% year over year to $27.6 million.

Concentra

The segment’s operating revenues increased 3% year over year to $410.6 million in the fourth quarter, courtesy of a 8.3% growth in patient visits. Adjusted EBITDA grew 1.9% year over year to $70.7 million.

Financial Position (as of Dec 31, 2021)

Select Medical exited the fourth quarter with cash and cash equivalents of $74.3 million, which decreased to nearly eight-fold from the 2020-end level.

Long-term debt, net of current portion, increased 4.9% from the figure at 2020 end to $3.6 billion.

Total equity of $1.3 billion rose 5.8% from the figure as of Dec 31, 2020.

Net cash used in operating activities in the fourth quarter was $60.8 million, which compares unfavorably with the prior-year quarter’s net cash provided by operating activities of $207.4 million.

Share Repurchase & Dividend Update

Select Medical bought back shares worth around $11.1 million in the fourth quarter. Last year, SEM’s board of directors authorized an increase in its share repurchase program based on which the company can buy back shares worth $1 billion. If not extended further or concluded earlier, the program will run till the end of 2023.

Management approved a cash dividend of 12.5 cents per share on Feb 17, 2022. The dividend will be paid on or about Mar 16, 2022 to shareholders of record as on Mar 4.

Business Update

In December 2021, Select Medical announced that it has bumped up ownership in Concentra Group Holdings. Consequent to the acquisition, SEM holds around 99.3% of the outstanding membership stake (on a fully-diluted basis) and 100% voting membership stake in Concentra.

Full-Year Update

Total revenues for 2021 were $6.2 billion, which grew 12.2% year over year and matched the Zacks Consensus Estimate.

Adjusted earnings of Select Medical were $2.98 per share, which beat the Zacks Consensus Estimate of $2.90. The bottom line surged 57.7% year over year. Adjusted EBITDA of $947.4 million improved 18.3% year over year in 2021.

During the year, net cash provided by operating activities plunged 61% from the 2020 figure to $401.2 million.

SEM repurchased shares worth roughly $58.6 million in 2021.

2022 Business Outlook Unveiled

Select Medical disclosed its business outlook for 2022 with respect to only revenues.

Revenues are now anticipated to lie within $6.25-$6.40 billion, which indicates an increase from the 2021 level of $6.2 billion. SEM maintains its three-year (2021-2023) compound annual growth rate for revenues between 4% and 6%.

When the labor climate stabilizes, Select Medical will readdress its business outlook and target compound annual growth rates for adjusted EBITDA and earnings per common share.

Zacks Rank

Select Medical currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Medical Sector Releases

Among other players from the Medical space that have reported fourth-quarter results so far, the bottom-line results of Centene Corporation (CNC - Free Report) , Cigna Corporation (CI - Free Report) and Anthem, Inc. beat the respective Zacks Consensus Estimate.

Centene's fourth-quarter 2021 adjusted earnings per share of $1.01, outpaced the Zacks Consensus Estimate by 3.1%. The bottom line more than doubled year over year. CNC’s total revenues amounted to $32.6 billion in the fourth quarter, which rose 15% year over year but missed the consensus mark by a whisker. As of Dec 31, 2021, managed care membership of Centene rose 4% year over year to 26.6 million.

Cigna reported fourth-quarter 2021 earnings of $4.77 per share, which beat the Zacks Consensus Estimate by 1.9%. The bottom line improved 36% year over year. Adjusted revenues of CI totaled $45.7 billion, which rose 10% year over year in the quarter under review. The top line outpaced the consensus mark by 3.7%. Cigna witnessed an uptick of 431,000 customers on a year-over-year basis to 17.1 million in its medical enrollment in the fourth quarter.

Anthem delivered fourth-quarter 2021 earnings of $5.14 per share, which beat the Zacks Consensus Estimate by 0.6%, owing to better revenues. The bottom line soared 102.4% year over year. Operating revenues of ANTM for the quarter grew 14.2% year over year. Anthem’s benefit expense ratio of 89.5% expanded 60 bps from the prior-year quarter’s figure.


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