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Why Is Universal Health Services (UHS) Up 4.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Universal Health Services (UHS - Free Report) . Shares have added about 4.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Universal Health Services due for a pullback? 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’s Q2 Earnings Top Estimates, Rise Y/Y

Universal Health delivered second-quarter 2019 adjusted earnings of $2.76 per share, beating the Zacks Consensus Estimate by 10.8%. Moreover, the bottom line improved 11.7% year over year and this upside is mainly attributable to rising revenues.

Further, net revenues increased 6.5% year over year to $2.8 billion and also exceeded the Zacks Consensus Estimate by 1.6%, backed by higher admissions and patient days.

Total operating expenses of $2.5 billion at the end of the second quarter increased 6.5% year over year, mainly due to salaries, wages and benefits along with other operating expense plus supplies expenses.

Segmental Update

Acute Care Hospitals:

Adjusted admissions and adjusted patient days rose 5% and 5.2%, respectively, from the prior-year quarter. Net revenues (on a same-facility basis) climbed 9% in the second quarter, majorly aided by higher admissions and patient days.

Behavioral Hospitals:

On same-facility basis, adjusted admissions inched up 0.5% while adjusted patient days dipped 0.3%, both on a year-over-year basis. Net revenues were up 2.7% during the quarter under review on same-facility basis owing to higher admissions.

Financial Update

As of Jun 30, 2019, the company had cash and cash equivalents of nearly $61.3 million, up 41.7% from the level at 2018 end.

Total assets were $11.8 billion as of Jun 30, 2019, up 4.3% from the 2018-end figure.

The company’s long-term debt came in at $4 billion, up 3.1% from the level at 2018 end.

For the first six months of 2019, net cash provided by operating activities totaled $624 billion, up 2.8% year over year.

Buyback Program

In the second quarter, the company bought back 2.72 million shares worth $339.2 million.

In July 2019, the company’s board of directors increased its share buyback plan by $1 billion.

The company’s cash dividend was hiked from 10 cents to 20 cents per share in July, 2019. This meatier dividend will be paid out on Sep 16, 2019 to shareholders of record on Sep 3, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Universal Health Services has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Universal Health Services has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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