It has been about a month since the last earnings report for Universal Health Services (
UHS Quick Quote UHS - Free Report) . Shares have lost about 3.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Universal Health Services due for a breakout? 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 Q1 Earnings Miss Mark, Tumble Y/Y
Universal Health reported first-quarter 2022 adjusted earnings of $2.15 per share, which missed the Zacks Consensus Estimate of $2.47 by 13%. The bottom line decreased 11.9% year over year.
Results were hurt by escalating expenses and lower admissions in its Behavioral Health Care Services segment. However, the same was partly offset by better revenues.
Quarterly Operational Update
Net revenues of $3.29 billion improved 9.3% year over year. The top line beat the consensus mark by 2.2%.
Total operating costs rose 12.6% year over year to $3 billion in the first 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 5.5% year over year in the first quarter. Net revenues improved 9.7% year over year in the quarter on same facility basis from UHS’s acute care services.
Behavioral Health Care Services
In the quarter under review, adjusted patient days on same facility basis slid 1.3% year over year. Net revenues drawn from Universal Health’s behavioral health care services inched up 3.8% year over year.
Financial Update (as of Mar 31, 2022)
Universal Health exited the first quarter with cash and cash equivalents of $105.9 million, down 8.1% from the level at 2021 end.
UHS had $736 million of aggregate available borrowing capacity pursuant to its $1.2-billion revolving credit facility, net of outstanding borrowings and letters of credit at the end of first-quarter 2022.
Total assets of $13.1 billion were up 0.4% from the figure as of Dec 31, 2021.
UHS’s long-term debt totaled $4.25 billion, which increased 2.6% from the 2021-end level.
During the three months of 2022, net cash provided by operating activities of $445 million compares favorably with $72 million reported in the year-ago comparable period.
This was mainly on the back of a favorable change resulting from Medicare-accelerated payments received in 2020 and repaid in first-quarter 2021, an unfavorable change in accounts receivable, an unfavorable change from a decline in net income and depreciation and amortization expense, stock-based compensation expense and gain/loss on sales of assets and businesses along with other combined net unfavorable changes.
Share Repurchase Update
In the first quarter, Universal Health bought back 2.65 million shares worth $350.2 million.
In February, management hiked its share repurchase plan by $1.4 billion. As of Mar 31, 2021, UHS had an aggregate stock buyback plan of $1.41 billion
Universal Health reaffirmed its previously issued 2022 operating result forecast.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.53% due to these changes.
Currently, Universal Health Services has a great Growth Score of A, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Universal Health Services has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.