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Universal Health Services (UHS) Up 11.4% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Universal Health Services (UHS - Free Report) . Shares have added about 11.4% 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 catalysts.
Universal Health Q3 Earnings Beat on Adjusted Patient Days
Universal Health posted robust third-quarter performance, thanks to an expanding patient base at its acute care and behavioral health care facilities, resulting in substantial contributions from these segments. Increased same-facility-adjusted patient days also contributed positively to the outcomes. Nevertheless, the upside was partly offset by rising expenses related to salaries, wages and benefits.
UHS reported third-quarter 2023 adjusted earnings per share (EPS) of $2.55, which beat the Zacks Consensus Estimate by 9%. The bottom line climbed a penny from the year-ago period.
Net revenues amounted to $3.6 billion in the quarter under review, which rose from $3.3 billion a year ago. The top line outpaced the consensus mark by 0.9%.
Quarterly Operational Update
Adjusted EBITDA net of NCI declined 1.5% year over year to $421.5 million in the third quarter but came higher than our estimate of $407.3 million.
Total operating costs of $3.3 billion increased 7.1% year over year and were in line with our estimate. The figure rose due to higher salaries, wages and benefits, other operating expenses, supplies costs and lease and rental expenses.
Segmental Update
Acute Care Hospital Services
In the third quarter, adjusted admissions (adjusted for outpatient activity) advanced 6.8% year over year on a same-facility basis. Adjusted patient days rose 3.8% year over year. Net revenues stemming from Universal Health’s acute care services improved 7.5% year over year on a same-facility basis.
Behavioral Health Care Services
Adjusted admissions grew 0.8% year over year on a same-facility basis in the quarter under review, marginally lower than our estimate of 0.9% growth. Meanwhile, adjusted patient days inched up 1.1% year over year, higher than our model estimate of 1%. On a same-facility basis, net revenues derived from the behavioral healthcare services of UHS increased 7.6% year over year.
Financial Update (as of Sep 30, 2023)
Universal Health exited the third quarter with cash and cash equivalents of $80.8 million, which plunged from the $102.8 million level 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 $721 million at the third-quarter end.
Total assets of $13.9 billion increased from the 2022-end figure of $13.5 billion.
Long-term debt amounted to $4.8 billion, which increased from the figure of $4.7 billion as of Dec 31, 2022. Current maturities of long-term debt totaled $126.6 million.
Total equity increased from the 2022-end level of $6 billion to $6.1 billion.
In the first nine months of 2023, UHS generated cash flows from operations of $815.4 million, which climbed from the prior-year comparable period’s $698.7 million. The growth came on the back of favorable other working capital accounts.
Share Repurchase Update
Universal Health bought back shares worth roughly $175.1 million in the third quarter. It had a leftover repurchase capacity of around $580 million as of Sep 30, 2023.
2023 Guidance
Management earlier forecasted net revenues to be between $14,130 million and $14,330 million for this year. The midpoint of the outlook implies 6.2% growth from the 2022 reported figure.
Adjusted EBITDA, net of NCI, was estimated to be $1,696-$1,756 million. The midpoint of the guidance suggests a 3.9% improvement from the 2022 figure. UHS projected adjusted EPS in the range of $9.85-$10.50. The midpoint of the forecast indicates a rise of 3% from the 2022 figure.
Depreciation and amortization were anticipated at $584.7 million. Interest expenses were estimated at around $199 million. Earlier, capital expenditures were expected within $725 million and $875 million for 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Universal Health Services has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 - Free Report) , has gained 14.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
HCA reported revenues of $16.21 billion in the last reported quarter, representing a year-over-year change of +8.3%. EPS of $3.91 for the same period compares with $3.93 a year ago.
For the current quarter, HCA is expected to post earnings of $5.01 per share, indicating a change of +8% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for HCA. Also, the stock has a VGM Score of B.
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Universal Health Services (UHS) Up 11.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Universal Health Services (UHS - Free Report) . Shares have added about 11.4% 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 catalysts.
Universal Health Q3 Earnings Beat on Adjusted Patient Days
Universal Health posted robust third-quarter performance, thanks to an expanding patient base at its acute care and behavioral health care facilities, resulting in substantial contributions from these segments. Increased same-facility-adjusted patient days also contributed positively to the outcomes. Nevertheless, the upside was partly offset by rising expenses related to salaries, wages and benefits.
UHS reported third-quarter 2023 adjusted earnings per share (EPS) of $2.55, which beat the Zacks Consensus Estimate by 9%. The bottom line climbed a penny from the year-ago period.
Net revenues amounted to $3.6 billion in the quarter under review, which rose from $3.3 billion a year ago. The top line outpaced the consensus mark by 0.9%.
Quarterly Operational Update
Adjusted EBITDA net of NCI declined 1.5% year over year to $421.5 million in the third quarter but came higher than our estimate of $407.3 million.
Total operating costs of $3.3 billion increased 7.1% year over year and were in line with our estimate. The figure rose due to higher salaries, wages and benefits, other operating expenses, supplies costs and lease and rental expenses.
Segmental Update
Acute Care Hospital Services
In the third quarter, adjusted admissions (adjusted for outpatient activity) advanced 6.8% year over year on a same-facility basis. Adjusted patient days rose 3.8% year over year. Net revenues stemming from Universal Health’s acute care services improved 7.5% year over year on a same-facility basis.
Behavioral Health Care Services
Adjusted admissions grew 0.8% year over year on a same-facility basis in the quarter under review, marginally lower than our estimate of 0.9% growth. Meanwhile, adjusted patient days inched up 1.1% year over year, higher than our model estimate of 1%. On a same-facility basis, net revenues derived from the behavioral healthcare services of UHS increased 7.6% year over year.
Financial Update (as of Sep 30, 2023)
Universal Health exited the third quarter with cash and cash equivalents of $80.8 million, which plunged from the $102.8 million level 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 $721 million at the third-quarter end.
Total assets of $13.9 billion increased from the 2022-end figure of $13.5 billion.
Long-term debt amounted to $4.8 billion, which increased from the figure of $4.7 billion as of Dec 31, 2022. Current maturities of long-term debt totaled $126.6 million.
Total equity increased from the 2022-end level of $6 billion to $6.1 billion.
In the first nine months of 2023, UHS generated cash flows from operations of $815.4 million, which climbed from the prior-year comparable period’s $698.7 million. The growth came on the back of favorable other working capital accounts.
Share Repurchase Update
Universal Health bought back shares worth roughly $175.1 million in the third quarter. It had a leftover repurchase capacity of around $580 million as of Sep 30, 2023.
2023 Guidance
Management earlier forecasted net revenues to be between $14,130 million and $14,330 million for this year. The midpoint of the outlook implies 6.2% growth from the 2022 reported figure.
Adjusted EBITDA, net of NCI, was estimated to be $1,696-$1,756 million. The midpoint of the guidance suggests a 3.9% improvement from the 2022 figure. UHS projected adjusted EPS in the range of $9.85-$10.50. The midpoint of the forecast indicates a rise of 3% from the 2022 figure.
Depreciation and amortization were anticipated at $584.7 million. Interest expenses were estimated at around $199 million. Earlier, capital expenditures were expected within $725 million and $875 million for 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Universal Health Services has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 - Free Report) , has gained 14.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
HCA reported revenues of $16.21 billion in the last reported quarter, representing a year-over-year change of +8.3%. EPS of $3.91 for the same period compares with $3.93 a year ago.
For the current quarter, HCA is expected to post earnings of $5.01 per share, indicating a change of +8% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for HCA. Also, the stock has a VGM Score of B.