Back to top

Image: Bigstock

Here's How Universal Health (UHS) Looks Ahead of Q2 Earnings

Read MoreHide Full Article

Universal Health Services, Inc. (UHS - Free Report) is slated to report second-quarter 2022 results on Jul 25, after the market closes.

Q2 Estimates

The Zacks Consensus Estimate for Universal Health’s second-quarter earnings per share is pegged at $2.08, which indicates a plunge of 44.7% from the prior-year quarter’s reported figure.

The consensus mark for revenues stands at $3.3 billion, suggesting a 3.8% growth from the year-ago quarter’s reported number.

Earnings Surprise History

Universal Health has a decent earnings surprise history. Its bottom line beat estimates in two of the trailing four quarters and missed twice, the average surprise being 5.93%. This is depicted in the chart below:

Factors to Note

Revenues of Universal Health are likely to reflect benefits from sound contribution from its Acute Care Hospital Services segment in the second quarter. UHS’ several consistent expansion initiatives, including opening acute care hospitals across different regions, might have boosted the segment’s revenues in the to-be-reported quarter.

However, lower-than-expected patient volumes, revenues and margins during April and May of 2022 (as cited by UHS management at the time of trimming its 2022 guidance) might have weighed on the segmental performance. The decline in COVID-related patient admissions at the acute care facilities in the abovementioned two months was not offset by an equal increase of non-COVID patients. This, in turn, may have dampened the growth prospects of the Acute Care Hospital Services segment. Based on the dismal scenario plaguing the segment, management expects the overall adjusted diluted net income of UHS between $2.05 and $2.15 in the second quarter.

The Zacks Consensus Estimate for net revenues of the Acute Care Hospital Services segment is pegged at $1.9 billion, which indicates an improvement of 8% from the prior-year quarter’s reported figure.

Meanwhile, softer contributions from its Behavioral Health Care Services segment might have weighed on Universal Health's top line. The unit is likely to have witnessed lower-than-expected patient volumes, revenues and margins in the to-be-reported quarter. The consensus mark for net revenues of the Behavioral Health Care Services segment stands at $1.4 billion, suggesting a 0.8% decrease from the year-ago quarter’s reported figure.

While the Zacks Consensus Estimate for acute care hospitals owned and leased by Universal Health indicates an increase by one facility from the prior-year quarter’s level, the same for behavioral health centers suggests the addition of two facilities.

Escalating labor costs stemming from the shortage of nurses and other medical personnel, which continues to plague the entire United States, may put pressure on margins of Universal Health. To counter these labor headwinds, UHS has been resorting to significant investments in boosting recruitment and retention efforts. Though these initiatives are expected to fetch the healthcare provider benefits over the long term, these investments are expected to have resulted in escalating costs in the to-be-reported quarter.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Universal Health this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here.

Earnings ESP: Universal Health has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: UHS currently has a Zacks Rank #5 (Strong Sell).

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

Stocks to Consider

While an earnings beat looks uncertain for Universal Health, here are some companies from the Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:

Medpace Holdings, Inc. (MEDP - Free Report) has an Earnings ESP of +6.23% and a Zacks Rank of 1. The Zacks Consensus Estimate for Medpace’s second-quarter 2022 earnings is pegged at $5.90 per share, indicating an improvement of 22.7% from the year-ago quarter’s reported figure.

MEDP beat earnings estimates in each of the trailing four quarters.

Neurocrine Biosciences, Inc. (NBIX - Free Report) has an Earnings ESP of +40.43% and a Zacks Rank #2. The Zacks Consensus Estimate for Neurocrine Biosciences’ second-quarter 2022 earnings is pegged at $1.92 per share, which indicates more than doubling itself from the prior-year quarter’s reported figure.

The consensus mark for NBIX’s second quarter’s earnings has moved 1.8% north over the past seven days.

Repligen Corporation (RGEN - Free Report) has an Earnings ESP of +4.79% and a Zacks Rank #3, currently. The Zacks Consensus Estimate for Repligen’s second-quarter 2022 earnings is pegged at $3.10, which indicates a 1.3% increase from the prior-year quarter’s reported figure.

RGEN outpaced earnings estimates in each of the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.