A month has gone by since the last earnings report for Universal Health Services (UHS Quick QuoteUHS - Free Report) . Shares have added about 18.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Universal Health Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Universal Health Q3 Earnings Top on Better Patient Volumes

Universal Health Services reported third-quarter 2022 adjusted earnings of $2.54 per share, which beat the Zacks Consensus Estimate by 5.8%. However, the bottom line fell 4.9% year over year.

UHS’ quarterly results benefited from higher patient admissions at its acute care and behavioral health care facilities. Despite seeing an uptrend, growth in patient volumes in the behavioral health care segment was partly offset by the issue of shortage of nurses and other medical personnel that continues to grapple most U.S. healthcare providers.

Consequently, the margins of Universal Health took a hit as it had to incur elevated labor costs in the form of recruiting expensive temporary personnel or raising wages and benefits to attract and retain nurses and other clinical staff to counter the staffing scarcity.

Quarterly Operational Update

Net revenues of $3.3 billion improved 5.7% year over year in the third quarter. The top line outpaced the consensus mark by a whisker.

Adjusted earnings before interest, taxes, depreciation & amortization (EBITDA), net of net income attributable to noncontrolling interests (NCI), declined 4.6% year over year to $427.8 million.

Total operating costs of $3.1 billion increased 7.7% year over year, primarily due to higher salaries, wages and benefits, other operating expenses, and depreciation and amortization.

Segmental Update

Acute Care Hospital Services

In the third quarter, adjusted admissions (adjusted for outpatient activity) rose 1.9% year over year on a same-facility basis, while adjusted patient days declined 5% year over year. Net revenues stemming from Universal Health’s acute care services inched up 0.9% year over year on a same-facility basis.

Behavioral Health Care Services

Adjusted admissions improved 4% year over year on a same-facility basis in the quarter under review, while adjusted patient days grew 3.3% year over year. Net revenues derived from behavioral health care services of UHS advanced 8.4% year over year.

Financial Update (as of Sep 30, 2022)

Universal Health exited the third quarter with cash and cash equivalents of $74.6 million, which plunged 35.3% from the 2021-end level.

Within its $1.2-billion revolving credit facility, net of outstanding borrowings and letters of credit, UHS had $1 billion of aggregate available borrowing capacity at the third-quarter end.

Total assets increased 2.2% from the 2021-end level to $13.4 billion.

Long-term debt of $4.6 billion escalated 12% from the figure at 2021 end.

Total equity amounted to $5.9 billion, which dropped 4.7% from the level as of Dec 31, 2021.

During the first nine months ended Sep 30, 2022, net cash provided by operating activities of nearly $699 million improved 24.4% from the prior-year comparable period’s level. Significant growth came on the back of a favorable change from the early return of Medicare-accelerated payments received in 2020 and repaid in first-quarter 2021.

Share Repurchase Update

Universal Health bought back around 1.6 million shares worth $157.9 million. UHS had $1.1 billion left under its total repurchase authorization as of Sep 30, 2022.

2022 Guidance

Earlier, management anticipated net revenues to be $13.235-$13.371 billion for this year, the midpoint of which implies 5.2% growth from the 2021 figure.

Adjusted EBITDA, net of NCI, was estimated within $1.635-$1.712 billion. The midpoint of the outlook indicates an 11.9% decline from the reported figure of 2021.

UHS expected adjusted earnings per share for 2022 in the range of $9.60-$10.40, the mid-point of which suggests a 15.4% drop from the 2021 reported figure.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -7.19% due to these changes.

VGM Scores

Currently, Universal Health Services has a nice Growth Score of B, 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 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Universal Health Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Universal Health Services belongs to the Zacks Medical - Hospital industry. Another stock from the same industry, HCA Healthcare (HCA Quick QuoteHCA - Free Report) , has gained 9.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

HCA reported revenues of $14.97 billion in the last reported quarter, representing a year-over-year change of -2%. EPS of $3.93 for the same period compares with $4.57 a year ago.

For the current quarter, HCA is expected to post earnings of $4.76 per share, indicating a change of +7.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.

HCA has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.