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Select Medical (SEM) Shares Up on Q1 Earnings & Revenue Beat

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Select Medical Holdings Corporation’s (SEM - Free Report) shares have gained 3.5% since it reported first-quarter 2022 results on May 5, wherein earnings and revenues outpaced the Zacks Consensus Estimate. Investor sentiments might have been buoyed by revenue growth driven by sound contributions from four of SEM’s segments (Critical Illness Recovery Hospital, Rehabilitation Hospital, Outpatient Rehabilitation and Concentra) and rebounding patient visits across the Outpatient Rehabilitation and Concentra segments.

However, the upside was partly offset by escalating labor costs stemming primarily from higher nursing agency costs and incentive bonuses for employed staff within the Critical Illness Recovery Hospital segment.

Q1 Update

Select Medical reported first-quarter adjusted earnings of 37 cents per share, which beat the Zacks Consensus Estimate by 27.6%. However, the bottom line plunged nearly 55% year over year.

Net operating revenues amounted to $1.6 billion, which rose 3.4% year over year in the first quarter. The top line outpaced the consensus mark by 3%.

Total costs and expenses escalated 8.5% year over year to $1.5 billion due to increases of 8.8%, 6% and 2.9% in cost of services, general and administrative expenses, and depreciation and amortization costs, respectively.

Adjusted EBITDA of $163.8 million plunged 36.6% year over year in the quarter under review.

Segmental Update

Critical Illness Recovery Hospital

The segment reported operating revenues of $601.8 million, which inched up 1.2% year over year. However, patient days dipped 1.3% year over year in the first quarter. Adjusted EBITDA of $36 million declined 68.2% year over year.

Rehabilitation Hospital Segment

Operating revenues of $220.6 million grew 6.2% year over year in the segment, driven by a 1.3% increase in patient days. Adjusted EBITDA slumped 16% year over year to $42.4 million in the quarter under review.

Outpatient Rehabilitation

The segment’s operating revenues of $271.9 million climbed nearly 8% year over year in the first quarter. The improvement came on the back of a 10% growth in patient visits. Adjusted EBITDA of $26.6 million inched up 1% year over year.

Concentra

Operating revenues amounted to $423.4 million in the segment, up 0.1% year over year and attributable to an 11.5% growth in patient visits. Adjusted EBITDA improved 9.1% year over year to $89.5 million in the quarter under review.

Financial Position (as of Mar 31, 2022)

Cash and cash equivalents of Select Medical amounted to $130.9 million, which plunged 76.1% from the 2021-end level. Total assets of $7.5 billion increased 2.4% from the figure at the 2021-end.

SEM had $253 million left under its revolving loans at the end of the first quarter.

Long-term debt, net of the current portion, escalated 5.1% from the 2021-end level to $3.7 billion.

Total equity of $1.4 billion advanced 3.1% from the figure at the 2021-end.

Net cash provided by operating activities declined nearly 38-fold year over year to $6.3 million in the first quarter.

Share Repurchase & Dividend Update

Select Medical bought back shares of roughly $51.7 million in the quarter under review. The $1-billion share buyback program, which its board of directors had approved and under which additional shares worth $533 million can be repurchased, will run till the end of 2023 if not extended further or concluded earlier.

Concurrent with the quarterly earnings release, management sanctioned a cash dividend of 12.5 cents per share. The dividend will be paid out on or about Jun 1, 2022, to shareholders of record as of May 19, 2022.

2022 Business Outlook Reiterated

Revenues are anticipated within $6.25-$6.40 billion, the mid-point of which indicates a 2% rise 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%.

Capital expenditures are estimated between $180 million to $200 million this year.

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

Zacks Rank

Select Medical currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Medical Sector Releases

Of the Medical sector players that have reported first-quarter results so far, earnings of Centene Corporation (CNC - Free Report) , Anthem, Inc. and Molina Healthcare, Inc. (MOH - Free Report) beat the Zacks Consensus Estimate.

Centene reported first-quarter 2022 adjusted earnings per share of $1.83, which surpassed the Zacks Consensus Estimate by 8.9%. The bottom line improved 12.3% year over year. Total revenues of Centene rose 24% year over year to $37.2 billion in the first quarter. The top line beat the consensus mark by 7.2%. Managed care membership of CNC grew 8% year over year to 26.2 million as of Mar 31, 2022.

Anthem reported first-quarter 2022 earnings of $8.25 per share, which outpaced the Zacks Consensus Estimate of $7.81 by 5.6%. ANTM’s bottom line also improved 17.7% year over year. Operating revenues of Anthem for the first quarter totaled $37.9 billion, which rose 18% year over year and surpassed the consensus mark by 1.4%. As of Mar 31, 2022, medical enrollment of Anthem amounted to roughly 46.8 million, which grew 7.5% year over year.

Molina Healthcare reported first-quarter 2022 adjusted earnings of $4.90 per share, beating the Zacks Consensus Estimate of $4.74. The bottom line increased from the year-ago earnings of $4.44 per share. Total revenues of $7,770 million beat the consensus mark of $7,538 million. The top line surged from the year-ago level of $6,522 million. Premium revenues for MOH increased to $7,531 million from $6,306 million a year ago.


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