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Can Universal Health (UHS) Q1 Earnings Beat on Admissions?

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Universal Health Services, Inc. (UHS - Free Report) is set to report first-quarter 2018 results on Apr 25 after market close. Last quarter, the company delivered a positive earnings surprise of 8.70%.

Let’s see, how things are shaping up for this announcement.

Universal Health’s Acute Care and Behavioral Health segments have been registering a strong performance over the past several quarters, on the back of a continuous rise in admissions, licensed beds and patient days, leading to higher revenues in turn.  The to-be-reported quarter is expected to have witnessed the same uptrend.

The Zacks Consensus Estimate for total revenues in the first quarter is pegged at $2.7 billion, reflecting year-over-year growth of 5%.  Our consensus estimate for the metric from Acute Care and Behavioral Health segments stands at $1.5 billion and $1.3 billion, respectively, up 6.4% and 3.5% each, year over year.

Since 2012, the average number of licensed beds in the Acute Care hospitals and Behavioral Health centers has been increasing. Our consensus mark for Average Licensed Beds in Acute Care as well as Behavioral Health is pegged at 6.2 billion and 23.3 billion, respectively. Each figure is up 1.5% and 1.2% on a year-over-year basis.

An increase in the bed count at both the facilities will likely drive admission volumes. The Zacks Consensus Estimate for Admissions in Acute Care and Behavioral Health is 78.3 billion and 120.7 billion respectively, up 5.3% and 2% year over year, each.

In addition, the company’s continuous focus on enhancing shareholder value through share repurchases might have boosted its bottom line by limiting share count in the to-be-reported quarter.

However, the company’s earnings are likely to be affected by the rising costs related to interest payment, reserves for settlements, legal judgments as well as lawsuits plus impairments of long-lived assets.

Why a Likely Positive Surprise?

Our proven model shows that Universal Health has the right combination of the following two key ingredients to beat estimates this quarter:

Zacks ESP: Universal Health has an Earnings ESPof +0.32%. A stock’s positive ESP raises confidence about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Universal Health Services, Inc. Price and EPS Surprise


Zacks Rank: Universal Health carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have significantly higher chances of an earnings beat.

Conversely, we caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Stocks to Consider

Here are some other stocks worth considering from the same space with the right combination of elements to also come up with an earnings beat this time around:

Acadia Healthcare, Inc. (ACHC - Free Report) is set to report first-quarter earnings on May 1. The company has an Earnings ESP of +0.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

LifePoint Health, Inc. , which is scheduled to release first-quarter earnings on Apr 27, has an Earnings ESP of +7.60% and a Zacks Rank of 3.

Tenet Healthcare Corporation (THC - Free Report) has an Earnings ESP of +0.32% and is a Zacks #2 Ranked player. The company is set to announce first-quarter earnings on Apr 25.

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