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Universal Health Buys Medical Center in Nevada, Stock Down

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Share price of Universal Health Services, Inc (UHS - Free Report) fell nearly 3% following the company’s acquisition of Desert View Regional Medical Center, a Nevada-based twenty-five bed community care hospital of Rural Health Group (RHG). However, the terms of the deal have been kept under wraps.

While market is yet to show any positive sentiment, management is highly optimistic about this deal. The integration of Desert View is expected to expand Universal Health’s footprint in Nevada where it already has Northern Nevada Medical Center and six acute-care operating wings in Las Vegas.

Desert View works through multiple facilities that include surgical suites, emergency rooms, diagnostic imaging centers and a lot more. The hospital focuses on providing care to a specific community in Pahrump, located in the Nevada-California border.

As per management, this acquisition will not only strengthen Universal Health’s acute-care business in the existing markets but will also pave a way for the opening of a new 142-bed hospital in Henderson, later this year.

Our Take

Taking into consideration the growing awareness in the acute care markets, we believe the recent acquisition will help Universal Health tap in on significant opportunities, going ahead.

Meanwhile, the ‘patient handling equipment market’ is forecasted to grow at a CAGR of 10.5% to reach $17.18 billion by 2021 (Markets And Markets). On the basis of ‘type of care’, this market has been majorly categorized into acute care, long-term care, critical care and a few more segments. Buoyed by this trend, we presume Universal Health will significantly gain traction in the acute care and related ancillary markets benefitting from this deal.

However, the company currently represents an unimpressive one year return of -15.65%, way below the S&P 500’s return of 3.87% over the same time frame.

We believe completion of this takeover and the imminent opening of the new hospital in Henderson (scheduled to open in the fourth quarter of this year) are significant positives for Universal Health.

Zacks Rank & Key Picks

Currently, Universal Health has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector include CryoLife Inc. (CRY - Free Report) , Masimo Corporation (MASI - Free Report) and NuVasive Inc. (NUVA - Free Report) . Notably, all the three stocks sport a Zacks Rank #1 (Strong Buy).

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