Shares of Universal Health Realty Income Trust (UHT Quick QuoteUHT - Free Report) have lost 5.9% since the company reported its earnings for the quarter ended June 30, 2025. This compares to the S&P 500 Index’s 0.8% decline over the same time frame. Over the past month, the stock lost 5.9% against the S&P 500’s 2.1% growth.

UHT’s Earnings Snapshot

Universal Health Realty reported a net income of $4.5 million, or $0.32 per diluted share, for the second quarter of 2025, marking a decline of 14.9% from $5.3 million, or $0.38 per diluted share, in the same period last year — a 15.8% year-over-year drop in earnings per share (EPS). The primary contributors to the decline in EPS were the absence of a $563,000 property tax reduction benefit recorded last year, higher interest expenses due to increased borrowings and weaker property-level income.

Funds from operations (FFO), a key metric for real estate investment trusts (REITs), declined 4.8% to $11.8 million ($0.85 per diluted share) from $12.4 million ($0.90 per diluted share) year over year. Revenue remained relatively flat, rising marginally to $24.9 million from $24.7 million a year earlier.

Segmentally, lease revenue from Universal Health Services (UHS) facilities declined 0.9% to $8.4 million from $8.5 million, while lease revenue from non-related parties rose 1.5% to $14.6 million from $14.4 million.

Universal Health Realty’s Other Key Business Metrics

For the six-month period ended June 30, 2025, UHT’s net income declined 12.4% to $9.3 million ($0.67 per diluted share) from $10.6 million ($0.76 per diluted share). FFO decreased 4.3% to $23.7 million ($1.71 per diluted share) from $24.8 million ($1.79 per diluted share) in the prior-year period. This decline in FFO was largely attributable to the same factors influencing quarterly results — reduced property-level income, higher interest expenses, and the absence of one-time tax reductions.

Total expenses for the second quarter of 2025 increased 5.8% to $16 million from $15.2 million, driven primarily by higher depreciation and other operating costs. Advisory fees paid to UHS rose 1.6% to $1.39 million from $1.37 million. Interest expense also grew 2.9% to $4.7 million from $4.6 million due to elevated borrowings. Notably, the company reported bonus rental income from McAllen Medical Center of $862,000 in the quarter, up from $758,000 a year ago.

On the balance sheet, Universal Health Realty held $6.6 million in cash and cash equivalents as of June 30, 2025, compared with $7.1 million as of Dec. 31, 2024.

UHT’s Management Commentary and Risks

While management did not offer detailed commentary, they highlighted ongoing headwinds affecting operational performance. These include staffing shortages and wage pressures at tenant facilities, regulatory uncertainties, macroeconomic headwinds reducing patient volumes and altering payer mixes and the persistent impact of elevated interest rates on borrowing costs. Management emphasized that these dynamics, many of which are beyond their control, could materially affect tenant performance and, by extension, the REIT’s results.

Management reiterated the risks tied to potential cuts in Medicaid funding, reduced staffing availability across the healthcare sector and trade-related cost pressures affecting building materials. Of particular concern was the possibility of further interest rate hikes, which could significantly impact both the cost of debt and access to capital markets.

Universal Health Realty’s Capital and Dividend Updates

As of June 30, 2025, Universal Health Realty reported available borrowing capacity of $70.2 million under its $425 million credit facility, net of $354.8 million in outstanding borrowings. This facility remains in place through Sept. 30, 2028, with two optional six-month extension periods.

UHT declared a second-quarter dividend of $0.74 per share, up from $0.73 a year earlier. The dividend, totaling $10.3 million in aggregate, was paid on June 30, 2025, and underscores the company’s continued commitment to shareholder returns despite tighter earnings.

UHT’s Other Developments

During the quarter, Universal Health Realty's investment in limited liability companies increased significantly to $20.9 million from $13.9 million at the end of 2024. However, the company did not detail any new acquisitions, divestitures or business restructurings for the reporting period. The balance sheet also showed a modest decline in total assets to $573 million from $580.9 million at year-end 2024, while total equity fell to $165.2 million from $179.5 million, reflecting the net impact of dividend payments and earnings changes.