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Universal Health (UHS) Up 2.1% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Universal Health Services, Inc. (UHS - Free Report) . Shares have added about 2.1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is UHS due for a pullback? 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 catalysts.

Universal Health Q4 Earnings, Revenues Beat Estimates

Universal Health reported fourth-quarter 2017 adjusted earnings of $2.00 per share that surpassed the Zacks Consensus Estimate of $1.84 by 8.7%. Earnings also grew 11% year over year.

Net revenues increased 6.7% year over year to $2.64 billion in the fourth quarter, beating the Zacks Consensus Estimate of $2.63 billion.

Total operating expenses of $2.3 billion at the end of the fourth quarter increased 6.6% year over year.

Full-Year Update

For 2017, the company reported net income of $7.81 per share, up 9.3% year over year.

Universal Health’s net revenues came in at $10.41 billion, up 6.6% from 2016.

Total operating expenses were $9.1 billion, up 7.6% year over year.

Quarterly Segment Update

Acute Care Hospitals

Adjusted admissions and adjusted patient days increased 7.3% and 5.2%, respectively, from the prior-year quarter. Net revenues from acute care services climbed 6.5% in the fourth quarter.

Behavioral Hospitals

On a same facility basis, adjusted admissions increased 2.5% while adjusted patient days declined 0.7%, both on a year-over-year basis. Net revenues increased 1.6% during the quarter on a same facility basis.

Financial Update

As of Dec 31, 2017, the company had cash and cash equivalents of nearly $74.4 million, up 120% from year-end 2016.

Total assets were $10.8 billion as of Dec 31, 2017, up 4.3% from year-end 2016.

The company managed to lower its debt burden, as evident from its long-term debt of $3.5 billion as of Dec 31, 2017, down 13% from year-end 2016.

For 2017, net cash provided by operating activities decreased 11.3% to $1.18 billion year over year. 

Buyback Program

In November 2017, the board of directors authorized a $400 million increase in Universal Health’s stock repurchase program, which raised the aggregate authorization to $1.2 billion from $800 million approved during 2016 and 2014. 

During the fourth quarter, the company repurchased nearly 1 million shares at an aggregate cost of $100.8 million.

In 2017, the company repurchased approximately 2.96 million shares at an aggregate cost of approximately $322.2 million.

2018 Guidance

The company expects adjusted earnings per share to be within $9.25 to $9.90.

Revenues are expected in the range of $10.923 billion to $11.063 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 6.2% due to these changes.

Universal Health Services, Inc. Price and Consensus

 

VGM Scores

Currently, UHS has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise UHS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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