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Universal Health Services (UHS) Down 10.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Universal Health Services (UHS - Free Report) . Shares have lost about 10.8% in that time frame, underperforming 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 Beat on Higher Admissions

Universal Health Services reported first-quarter 2023 adjusted earnings per share (EPS) of $2.34, which surpassed the Zacks Consensus Estimate by 8.8% and our estimate of $2.14. Additionally, the bottom line grew 8.8% year over year.

Net revenues of Universal Health advanced 5.3% year over year to $3,468 million in the quarter under review. The top line beat the consensus mark by 1.3% and our estimate of $3,415.5 million.

The strong quarterly results of UHS were supported by improved patient admissions at its acute care and behavioral healthcare facilities as well as rising patient days. However, the upside was partly offset by an elevated expense level.

Quarterly Operational Update

Adjusted earnings before interest, taxes, depreciation & amortization (EBITDA), net of net income attributable to noncontrolling interests (NCI), amounted to $421.1 million. The metric does not consider the impact of the provision for asset impairment and other (income) expenses, net. The figure improved 11% year over year and outpaced our estimate of $387.6 million.

Total operating costs escalated 4.2% year over year to $3,188.8 million in the first quarter. This was mainly due to increased salaries, wages and benefits, other operating expenses, supplies, lease and rental expenses. The continued shortage of nurses and other medical personnel throughout the United States kept the company under pressure.

Segmental Update

Acute Care Hospital Services

Adjusted admissions (adjusted for outpatient activity) grew 10.5% year over year on a same-facility basis in the quarter under review, while adjusted patient days increased 3.7% year over year. Net revenues derived from Universal Health’s acute care services witnessed a 3.5% year-over-year uptick on a same-facility basis.

Behavioral Health Care Services

In the first quarter, adjusted admissions increased 7.5% year over year on a same-facility basis. Adjusted patient days advanced 4.7% year over year. Net revenues stemming from the behavioral healthcare services of UHS rose 9.7% year over year.

Financial Update (as of Mar 31, 2023)

Universal Health exited the first quarter with cash and cash equivalents of $110 million, which increased from $102.8 million at 2022-end.

As part of the $1.2-billion revolving credit facility of UHS, net of outstanding borrowings and letters of credit, there remains an aggregate available borrowing capacity of $875 million at the first-quarter end.

Total assets of $13,556 million increased from $13,494.2 million at 2022-end.

Long-term debt amounted to $4,707.3 million, down from $4,726.5 million at 2022-end. Short-term debt was at $96.2 million.

Total equity of $6,052.4 million rose 1.5% from the figure at 2022-end.

In the first quarter of 2023, net cash provided by operating activities declined 34.7% from the 2022-end level to $290.8 million. The plunge in this metric was caused by unfavorable other working capital accounts.

Share Repurchase Update

Universal Health bought back shares worth roughly $78.7 million in the first quarter. It had leftover funds of around $869 million under its repurchase authorization as of Mar 31, 2023.

2023 Guidance

Earlier management provided guidance for net revenues between $14,044 million and $14,314 million. This indicates an improvement of around 4.8%-6.8% from the 2022 figure of $13,399.4 million.

Adjusted EBITDA, net of NCI, was earlier anticipated in the band of $1,662-$1,753 million, the midpoint of which suggests 2.7% growth from the 2022 figure of $1,662 million.

UHS projected adjusted EPS in the range of $9.50-$10.50 for 2023, the midpoint of which implies 1.2% growth from the 2022 figure of $9.88.

Depreciation and amortization were estimated at $594.4 million. Interest expenses were projected at around $198 million. Capital expenditures were expected within $725 and $875 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Universal Health Services has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.


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

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