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Universal Health Services (UHS) Down 6.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Universal Health Services (UHS - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Universal Health Services due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Universal Health Q1 Earnings, Revenues Miss Estimates

Universal Health reported first-quarter 2019 adjusted earnings of $2.45 per share, missing the Zacks Consensus Estimate by 5.8%. Meanwhile, the bottom line matched the prior-year quarter’s figure on the back of revenue growth.

Results were impacted by a pre-tax unrealized loss of $4.3 million due to a decline in the market value of shares of certain marketable securities. 

Net revenues increased 4.3% year over year to $2.8 billion, banking on higher admissions and patient days. However, the metric lagged the Zacks Consensus Estimate by 0.4%.

Total operating expenses of $2.5 billion at the end of the first quarter rose4.7% year over year, mainly due to salaries, wages and benefits along with other operating expense plus supplies expenses.

Segment Update

Acute Care Hospitals:

Adjusted admissions and adjusted patient days were up 4.9% and 4.4%, respectively, from the prior-year quarter. Net revenues (on a same facility basis) climbed 4.7% in the first quarter, majorly aided by a rise in admissions and patient days.

Behavioral Hospitals:

On same facility basis, adjusted admissions inched up 2.9% while adjusted patient days dipped 0.9%, both on a year-over-year basis. Net revenues were up 3% during the quarter under review on same facility basis.

Financial Update

As of Mar 31, 2019, the company had cash and cash equivalents of nearly $62.7 million, down 40.4% from the year-end 2018-level.

Total assets were $11.7 billion as of Mar 31, 2019, up 4.1% from the figure as of 2018 end.

The company’s long-term debt came in at $ 3.8 billion, down 2.9% from the number as of Dec 31, 2018.

For the first quarter, net cash provided by operating activities totaled $391 million, down 4.6% year over year due to an unfavorable change in accounts receivable as well as other combined adverse changes.

Buyback Program

During the first quarter, the company bought back shares worth $106.3 million.

Moreover, last December, its board of directors authorized a $500-million jump from the existing share repurchase program.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Universal Health Services has an average Growth Score of C, a grade with the same score on the momentum front. However, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Universal Health Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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