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Universal Health (UHS) Q2 Earnings Beat on Strong Segments

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Universal Health Services, Inc. (UHS - Free Report) reported second-quarter 2022 adjusted earnings of $2.20 per share, which outpaced the Zacks Consensus Estimate by 5.8%. However, the bottom line plunged 41.5% year over year.

The quarterly results were aided by sound contributions in its overall revenues from the Acute Care Hospital Services and Behavioral Health Care Services segments. The decline in COVID-related patient admissions at the acute care hospitals during April and May of this year was not offset by an equal increase of non-COVID patients. This, in turn, might have dampened the growth prospects of the Acute Care Hospital Services segment.

The performance of Universal Health was also hampered by escalating costs related to salaries, wages and benefits stemming from the shortage of nurses and other medical personnel, which continues to plague healthcare providers in the United States. This staffing scarcity had compelled UHS to curb patient volumes at its behavioral health care facilities.

Quarterly Operational Update

Net revenues grew 3.9% year over year to $3.3 billion in the second quarter. The top line beat the consensus mark by a whisker.

Total operating costs of $3.1 billion escalated 12% year over year in the quarter under review, mainly due to higher salaries, wages and benefits, other operating expenses, supplies expenses, depreciation and amortization.

Segmental Update

Acute Care Hospital Services

Adjusted patient days, on a same facility basis, improved 1.8% year over year in the second quarter, while adjusted admissions (adjusted for outpatient activity) dipped 0.7% year over year. Net revenues rose 3.3% year over year in the quarter on a same facility basis from UHS’s acute care services.

Behavioral Health Care Services

In the quarter under review, adjusted patient days on a same facility basis inched up 0.7% year over year. Meanwhile, adjusted admissions dipped 0.1% year over year. Net revenues stemming from Universal Health’s behavioral health care services increased 0.5% year over year.

Financial Update (as of Jun 30, 2022)

Universal Health exited the second quarter with cash and cash equivalents of $132.7 million, which climbed 15.1% from the 2021-end level.

UHS had nearly $1.1 billion of aggregate available borrowing capacity under its $1.2-billion revolving credit facility, net of outstanding borrowings and letters of credit at the end of the second quarter.

Total assets of $13.3 billion increased 1.5% from the level at the 2021 end.

Long-term debt amounted to $4.6 billion, up 11% from the figure as of Dec 31, 2021.

Total equity slipped 4.7% from the 2021-end level to $5.9 billion.

During the six months ended Jun 30, 2022, net cash provided by operating activities increased four-fold from the prior-year comparable period to $478 million. This can primarily be attributed to a favorable change arising from the early return of Medicare-accelerated payments received in 2020 and repaid in first-quarter 2021, an unfavorable change from a decrease in net income plus depreciation and amortization expenses, stock-based compensation expenses and gain or loss on sales of assets and businesses along with other combined net unfavorable changes.

Share Repurchase Update

Universal Health bought back roughly 1.61 million shares worth around $195.6 million. As of Jun 30, 2022, UHS had $1.2 billion left under its total repurchase authorization.

2022 Guidance

On Jun 30, 2022, Universal Health updated its 2022 outlook due to significant drawbacks in operations suffered in the first two months of the second quarter.

Management anticipated net revenues to be $13.235-$13.371 billion for this year, lower than the previous estimate of $13.424-$13.694 billion. The mid-point of the revised guidance suggested 5.2% growth from the 2021 figure.

Adjusted EBITDA was estimated within $1.635-$1.712 billion, down from the earlier estimate of $1.830-$1.927 billion. The mid-point of the revised guidance indicated a 11.9% decline from the reported figure of 2021.

UHS expected adjusted earnings per share (EPS) for this year in the range of $9.60 to $10.40, down from the prior projection of $11.90-$12.90. The mid-point of the revised guidance indicated a 15.4% decline from the 2021 reported figure.

Zacks Rank

Universal Health currently has a Zacks Rank #5 (Strong Sell).

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 second-quarter results so far, the bottom lines of UnitedHealth Group Incorporated (UNH - Free Report) , Elevance Health Inc. (ELV - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) beat the Zacks Consensus Estimate.

UnitedHealth Group reported second-quarter 2022 adjusted earnings of $5.57 per share, which beat the Zacks Consensus Estimate by 6.3%. The bottom line improved 19% year over year. Revenues of UNH were $80.3 billion, which climbed 13% year over year in the second quarter. The top line outpaced the consensus mark by 0.9%. The medical care ratio of UnitedHealth Group improved 130 basis points (bps) year over year to 81.5% during the quarter under review.

Elevance Health’s second-quarter 2022 earnings of $8.04 per share outpaced the Zacks Consensus Estimate of $7.72. The bottom line improved 14.4% year over year. Operating revenues of Elevance Health in the second quarter totaled $38,482 million, which rose 15.6% year over year. The top line beat the consensus mark of $38,120 million. As of Jun 30, 2022, medical enrollment of ELV amounted to roughly 47.1 million, which grew 6.1% year over year.

HCA Healthcare reported second-quarter 2022 adjusted earnings of $4.21 per share, which outpaced the Zacks Consensus Estimate by 14.7%. However, the bottom line declined 3.7% year over year. Revenues of HCA Healthcare amounted to $14.8 billion, which increased 2.7% year over year in the second quarter. Yet, the top line missed the consensus mark by a whisker. HCA’s same facility equivalent admissions inched up 0.5% year over year while same facility admissions dipped 1.2% year over year.