Select Medical Holdings Corporation’s (SEM Quick QuoteSEM - Free Report) shares gained 12.9% since it reported first-quarter 2024 results on May 2, 2024. Upward revision in adjusted EBITDA and earnings per share (EPS) outlook might have buoyed investor confidence in the stock. The first-quarter results benefited on the back of growth in patient days and admissions at the Critical Illness Recovery Hospital and Rehabilitation Hospital segments. However, the upside was partly offset by an elevated expense level. 

SEM reported first-quarter 2024 adjusted EPS of 77 cents, which surpassed the Zacks Consensus Estimate by 40%. The bottom line soared 37.5% year over year.

Net operating revenues amounted to $1.8 billion, which advanced 7.4% year over year. The metric beat the consensus mark by 5.1%.

Q1 Performance

Total costs and expenses increased 5.5% year over year to $1.6 billion in the quarter under review, higher than our estimate of $1.55 billion. The increase was due to escalating costs of services, exclusive of depreciation and amortization, and rising general and administrative expenses.

Adjusted EBITDA of $261.9 million rose 22.4% year over year and outpaced the Zacks Consensus Estimate of $221.4 million.

Segmental Update

Critical Illness Recovery Hospital

Revenues of the segment amounted to $655.9 million in the first quarter, which increased 10.4% year over year and beat the consensus mark of $589 million and our estimate of $588.8 million. The unit benefited from a 7.8% year-over-year increase in revenue per patient day. It also benefited from 2.7% and 1% rises in patient days and admissions, respectively. However, the metric was partially offset by a 1.4% decline in occupancy rate.

Adjusted EBITDA of $115.9 million climbed 51% year over year and beat the Zacks Consensus Estimate of $76 million and our estimate of $75.6 million. Adjusted EBITDA margin improved 480 basis points (bps) year over year to 17.7%.

Rehabilitation Hospital

The segment’s revenues improved 14.8% year over year to $265.7 million in the quarter under review. The figure outpaced the consensus mark of $240 million. Year-over-year increases of 8.6% and 8.3%, respectively, in admissions and patient days contributed to the strong performance of the unit.

Adjusted EBITDA of $61.4 million rose 30% year over year and beat the Zacks Consensus Estimate of $58 million. Adjusted EBITDA margin improved 270 bps year over year to 23.1%.

Outpatient Rehabilitation

Revenues amounted to $303.2 million in the segment, which grew 2.5% year over year in the first quarter but missed the consensus mark of $306 million. The improvement can be attributed to a 3.7% rise in patient visits, partially offset by a 2% decline in revenue per visit.

Adjusted EBITDA of $24.9 million declined 17.5% year over year and missed the Zacks Consensus Estimate and our estimate of $30.3 million. Adjusted EBITDA margin deteriorated 200 bps year over year to 8.2%.

Concentra

The segment reported revenues of $467.6 million, which advanced 2.5% year over year but missed the consensus mark of $475 million and our estimate of $475.3 million. A year-over-year decline of 1.9% in visits was offset by 4.5% growth in revenue per visit, benefiting the unit’s results.

Adjusted EBITDA improved 2.6% year over year to $96.1 million in the quarter under review and surpassed the Zacks Consensus Estimate of $95 million. Adjusted EBITDA margin of 20.6% improved 10 bps year over year.

Financial Position (as of Mar 31, 2024)

Select Medical exited the first quarter with cash and cash equivalents of $92.6 million, which rose from $84 million at 2023-end. It had $202.4 million left under its revolving facility as of Mar 31, 2024.

Total assets of $7.9 billion rose from $7.7 billion at 2023-end.

Long-term debt, net of the current portion, amounted to $3.8 billion, up from $3.6 billion at 2023-end.

Total equity of $1.6 billion rose from $1.5 billion at 2023-end.

Select Medical used cash flow from operations of $66.7 million in the reported quarter, which declined more than two-fold year over year.

Share Repurchase & Dividend Update

Select Medical did not buy back shares in the first quarter of 2024 under the $1 billion authorized share repurchase program, which is set to expire on Dec 31, 2025.

On May 1, 2024, management approved a cash dividend of 12.5 cents per share, which will be paid out on May 30, 2024, to shareholders of record as of May 16, 2024.

2024 Outlook

Management reaffirmed its previous revenue guidance between $6.9 billion and $7.1 billion, the mid-point of which suggests 4.5% growth from the 2023 reported figure of $6.7 billion.

Management revised its adjusted EBITDA guidance upward between $845 million and $885 million for 2024, the mid-point of which implies a 7.1% rise from the 2023 reported figure of $807.4 million.

EPS guidance is revised upward between $1.95 and $2.19, the mid-point of which indicates an improvement of 8.4% from the 2023 reported figure of $1.91.

Zacks Rank

Select Medical currently has a Zacks Rank #2 (Buy).  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 first-quarter 2024 results so far, the bottom-line results of The Cigna Group (CI Quick QuoteCI - Free Report) , Centene Corporation (CNC Quick QuoteCNC - Free Report) and Molina Healthcare, Inc. (MOH Quick QuoteMOH - Free Report) beat the respective Zacks Consensus Estimate.

Cigna reported first-quarter 2024 adjusted EPS of $6.47, which outpaced the Zacks Consensus Estimate by 4.9%. The bottom line advanced 19.6% year over year. Adjusted revenues advanced 23% year over year to $57.2 billion. The top line beat the consensus mark by 1.1%. The medical customer base was 19.2 million as of Mar 31, 2024, which slid 1.5% year over year. Adjusted selling, general and administrative (SG&A) expense ratio of 6.4% improved 120 basis points (bps) year over year.

CI reported adjusted income from operations of $1.9 billion, which rose 16% year over year. Adjusted revenues in the Evernorth Health Services segment climbed 28% year over year to $46.2 billion. Adjusted operating income on a pretax basis amounted to $1.36 billion. The Cigna Healthcare segment recorded adjusted revenues of $13.28 billion, which advanced 4% year over year. The unit’s pre-tax adjusted operating income rose 20% year over year to $1.3 billion. Medical care ratio improved 140 bps year over year to 79.9% at the first-quarter end.

Centene recorded first-quarter 2024 adjusted EPS of $2.26, which outpaced the Zacks Consensus Estimate by 8.1%. The bottom line improved 7.1% year over year. Revenues advanced 3.9% year over year to $40.4 billion. The top line beat the consensus mark by 11%. Revenues from Medicaid amounted to $21.5 billion, which slipped 3% year over year while Medicare revenues inched up 1% year over year to $5.9 billion.

Additionally, commercial revenues of $7.8 billion climbed 48% year over year. Premiums of CNC rose 5% year over year to $35.5 billion. Service revenues of $808 million declined 28.3% year over year. As of Mar 31, 2024, total membership was 28.4 million, which dipped marginally year over year. Adjusted net earnings grew 4.1% year over year to $1.22 billion.

Molina Healthcare reported first-quarter 2024 adjusted EPS of $5.73, which beat the Zacks Consensus Estimate by 5%. However, the bottom line dipped 1.4% year over year. Total revenues amounted to $9.9 billion, which improved 21.9% year over year. Also, the top line outpaced the consensus mark by 4.3%. Premium revenues of $9.5 billion climbed 21% year over year.

Investment income soared 52.1% year over year to $108 million. Adjusted general and administrative expense ratio deteriorated 10 bps year over year to 7.1%. MOH’s adjusted net income dipped 0.9% year over year to $334 million. The consolidated MCR (medical costs as a percentage of premium revenues) was 88.5%. The metric deteriorated 140 bps year over year. As of Mar 31, 2024, total membership advanced 9% year over year to around 5.7 million.