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Select Medical (SEM) Shares Fall 9.6% Since Q3 Earnings Miss
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Select Medical Holdings Corporation’s (SEM - Free Report) shares declined 9.6% since it reported weak third-quarter earnings on Nov 3, 2022. Higher costs and expenses, along with weak performance in the Critical Illness Recovery Hospital unit affected its third-quarter earnings. However, the negatives were partially offset by higher patient days and improved performance in the Rehabilitation Hospital unit.
Select Medical reported third-quarter adjusted earnings of 21 cents per share, which lagged the Zacks Consensus Estimate by 52.3%. The bottom line plunged 63.2% year over year.
Net operating revenues of $1,567.8 million inched up 2.2% year over year in the quarter under review. The top line also beat the consensus mark by 1.1%.
Total costs and expenses rose 7.1% year over year to $1,484.8 million due to a 7.7%, 4.2% and 2.7% rise in cost of services, general and administrative expenses, and depreciation and amortization costs, respectively.
Adjusted EBITDA came in at $153.1 million, which dropped 26.6% year over year in the third quarter.
Select Medical Holdings Corporation Price, Consensus and EPS Surprise
The segment’s operating revenues of $524.6 million declined 1.1% year over year on the back of a 2.1% decline in admissions and a 1.5% fall in occupancy rate. However, patient days within the segment inched up 2.1% year over year. Adjusted EBITDA of $11 million plunged 80.8% year over year.
Rehabilitation Hospital
Revenues of $229.4 million improved 8% year over year in the segment, courtesy of 5.9% growth in patient days, a 3.8% rise in admissions and a 3.7% jump in occupancy rate. Adjusted EBITDA increased 12.9% year over year to $49.8 million in the quarter under review.
Outpatient Rehabilitation
The segment reported operating revenues of $285 million in the third quarter, up 3.8% year over year. The increase can be attributed to a 2.5% increase in visits. Adjusted EBITDA of $25.7 million declined 33.7% year over year.
Concentra
Operating revenues of the segment amounted to $444.6 million, which rose 0.5% year over year. Patient visits rose 1.5% year over year. Adjusted EBITDA declined 9.8% year over year to $90 million in the quarter under review.
Financial Position (as of Sep 30, 2022)
Select Medical exited the third quarter with cash and cash equivalents of $108.2 million, which climbed from the 2021-end level of $74.3 million. Total assets of $7,555 million increased from the $7,360.2 million figure in 2021 end.
SEM had $213.5 million left under its revolving facility at the end of the third quarter.
Long-term debt, net of the current portion, increased from the 2021-end level of $3,556.4-$3,750.4 million.
Total equity of $1,334.5 million rose from the $1,325.9 million figure in 2021 end.
Net cash provided by operating activities declined to $94.3 million in the third quarter from $99 million a year ago.
Share Repurchase & Dividend Update
Select Medical bought back shares worth $185.1 million in the first nine months of the year. It has authorized a buyback program with $1 billion in funds, which is expected to terminate on Dec 31, 2023.
On Nov 2, 2022, management sanctioned a cash dividend of 12.5 cents per share. The dividend will be paid out on or about Nov 29, 2022, to its shareholders of record as of Nov 16, 2022.
2022 Business Outlook
Consolidated revenue guidance is reiterated to be within $6.25-$6.40 billion, the midpoint of which indicates a 2% rise from the 2021 level of $6.2 billion. SEM maintains its three-year (2021-2023) CAGR target for revenues between 4% and 6%.
Zacks Rank & Key Picks
Select Medical currently has a Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for Elevance Health’s earnings is currently pegged at $29.01 per share, indicating a year-over-year increase of 11.7%. ELV beat earnings estimates in all the past four quarters, with an average surprise of 4.1%.
The Zacks Consensus Estimate for Bright Health’s bottom line indicates a 41.7% improvement from the prior-year reported number. The consensus estimate for BHG’s top line also indicates 68.9% year-over-year growth.
The Zacks Consensus Estimate for Inventiva’s 2022 bottom line indicates an 11.3% year-over-year improvement. IVA has witnessed two upward estimate revisions in the past 60 days against none in the opposite direction.
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Select Medical (SEM) Shares Fall 9.6% Since Q3 Earnings Miss
Select Medical Holdings Corporation’s (SEM - Free Report) shares declined 9.6% since it reported weak third-quarter earnings on Nov 3, 2022. Higher costs and expenses, along with weak performance in the Critical Illness Recovery Hospital unit affected its third-quarter earnings. However, the negatives were partially offset by higher patient days and improved performance in the Rehabilitation Hospital unit.
Select Medical reported third-quarter adjusted earnings of 21 cents per share, which lagged the Zacks Consensus Estimate by 52.3%. The bottom line plunged 63.2% year over year.
Net operating revenues of $1,567.8 million inched up 2.2% year over year in the quarter under review. The top line also beat the consensus mark by 1.1%.
Total costs and expenses rose 7.1% year over year to $1,484.8 million due to a 7.7%, 4.2% and 2.7% rise in cost of services, general and administrative expenses, and depreciation and amortization costs, respectively.
Adjusted EBITDA came in at $153.1 million, which dropped 26.6% year over year in the third quarter.
Select Medical Holdings Corporation Price, Consensus and EPS Surprise
Select Medical Holdings Corporation price-consensus-eps-surprise-chart | Select Medical Holdings Corporation Quote
Segmental Update
Critical Illness Recovery Hospital
The segment’s operating revenues of $524.6 million declined 1.1% year over year on the back of a 2.1% decline in admissions and a 1.5% fall in occupancy rate. However, patient days within the segment inched up 2.1% year over year. Adjusted EBITDA of $11 million plunged 80.8% year over year.
Rehabilitation Hospital
Revenues of $229.4 million improved 8% year over year in the segment, courtesy of 5.9% growth in patient days, a 3.8% rise in admissions and a 3.7% jump in occupancy rate. Adjusted EBITDA increased 12.9% year over year to $49.8 million in the quarter under review.
Outpatient Rehabilitation
The segment reported operating revenues of $285 million in the third quarter, up 3.8% year over year. The increase can be attributed to a 2.5% increase in visits. Adjusted EBITDA of $25.7 million declined 33.7% year over year.
Concentra
Operating revenues of the segment amounted to $444.6 million, which rose 0.5% year over year. Patient visits rose 1.5% year over year. Adjusted EBITDA declined 9.8% year over year to $90 million in the quarter under review.
Financial Position (as of Sep 30, 2022)
Select Medical exited the third quarter with cash and cash equivalents of $108.2 million, which climbed from the 2021-end level of $74.3 million. Total assets of $7,555 million increased from the $7,360.2 million figure in 2021 end.
SEM had $213.5 million left under its revolving facility at the end of the third quarter.
Long-term debt, net of the current portion, increased from the 2021-end level of $3,556.4-$3,750.4 million.
Total equity of $1,334.5 million rose from the $1,325.9 million figure in 2021 end.
Net cash provided by operating activities declined to $94.3 million in the third quarter from $99 million a year ago.
Share Repurchase & Dividend Update
Select Medical bought back shares worth $185.1 million in the first nine months of the year. It has authorized a buyback program with $1 billion in funds, which is expected to terminate on Dec 31, 2023.
On Nov 2, 2022, management sanctioned a cash dividend of 12.5 cents per share. The dividend will be paid out on or about Nov 29, 2022, to its shareholders of record as of Nov 16, 2022.
2022 Business Outlook
Consolidated revenue guidance is reiterated to be within $6.25-$6.40 billion, the midpoint of which indicates a 2% rise from the 2021 level of $6.2 billion. SEM maintains its three-year (2021-2023) CAGR target for revenues between 4% and 6%.
Zacks Rank & Key Picks
Select Medical currently has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader medical space are Elevance Health Inc. (ELV - Free Report) , Bright Health Group, Inc. and Inventiva S.A. (IVA - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Elevance Health’s earnings is currently pegged at $29.01 per share, indicating a year-over-year increase of 11.7%. ELV beat earnings estimates in all the past four quarters, with an average surprise of 4.1%.
The Zacks Consensus Estimate for Bright Health’s bottom line indicates a 41.7% improvement from the prior-year reported number. The consensus estimate for BHG’s top line also indicates 68.9% year-over-year growth.
The Zacks Consensus Estimate for Inventiva’s 2022 bottom line indicates an 11.3% year-over-year improvement. IVA has witnessed two upward estimate revisions in the past 60 days against none in the opposite direction.