Universal Health Services (SUS) increased by 18.5% since the last revenue report: can it continue?

A month has passed since the last Universal Health Service (SUS) billing report. The stock has gained about 18.5% over that period, outperforming the S&P 500.

Will the recent positive trend continue leading to your next earnings release, or should Universal Health Services take a pullback? Before we dive into how investors and analysts have reacted lately, let’s take a quick look at the most recent earnings report to better understand the important factors.

Universal Health’s Q3 Earnings Are Best in Better Patient Volumes

Universal Health Services reported Q3 2022 adjusted earnings of $2.54 per share, which beat the Zacks consensus estimate by 5.8%. However, the bottom line was down 4.9% year-on-year.

UHS quarterly results benefited from increased patient admissions to its critical care and behavioral health units. Despite seeing an upward trend, the growth in patient volume in the behavioral health care segment has been partially offset by the issue of shortages in nurses and other medical personnel that continues to affect most US healthcare providers.

Consequently, Universal Health’s margins were hit, as it had to incur high labor costs in the form of expensive temporary staff recruitment or increased salaries and benefits to attract and retain nurses and other clinical professionals to combat staff shortages.

Quarterly operational update

Net income of $3.3 billion improved 5.7% year-over-year in the third quarter. The top line surpassed the consensus mark by one mustache.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), net of net income attributable to minority interests (NCI), declined 4.6% year-over-year to $427.8 million.

Total operating costs of $3.1 billion increased 7.7% year-over-year, primarily due to higher salaries and benefits, other operating expenses and depreciation and amortization.

segmental update

Acute care hospital services

In the third quarter, adjusted hospitalizations (adjusted for outpatient activities) increased 1.9% year-over-year on the same unit, while adjusted patient days decreased 5% year-over-year. Net revenues from Universal Health’s critical care services increased 0.9% year-over-year on a like-for-like basis.

behavioral health services

Adjusted admissions improved 4% year-over-year on a like-for-like basis in the quarter under review, while adjusted patient days grew 3.3% year-over-year. Net revenue from SUS behavioral health services increased 8.4% in the annual comparison.

Financial update (as of September 30, 2022)

Universal Health exited the third quarter with cash and cash equivalents of $74.6 million, which was down 35.3% from its final 2021 level.

Under its $1.2 billion revolving credit facility, net of outstanding loans and letters of credit, UHS had $1 billion of aggregate available borrowing capacity at the end of the third quarter.

Total assets increased 2.2% from the final 2021 level to $13.4 billion.

Long-term debt of $4.6 billion is up 12% from end-2021 value.

Total equity totaled $5.9 billion, down 4.7% from the December 31, 2021 level.

During the first nine months ended September 30, 2022, net cash provided by operating activities of nearly $699 million improved 24.4% over the prior year comparable period level. The significant growth was due to a favorable shift from the early return of accelerated Medicare payments received in 2020 and reimbursed in the first quarter of 2021.

Share repurchase update

Universal Health bought back about 1.6 million shares worth $157.9 million. UHS had $1.1 billion remaining under its full repurchase authorization as of September 30, 2022.

Orientation 2022

Previously, management predicted net income to be $13.235-$13.371 billion for this year, the midpoint of which implies 5.2% growth from the 2021 figure.

Adjusted EBITDA, net of NCI, was estimated at between $1.635 billion and $1.712 billion. The midpoint of the outlook indicates an 11.9% decline from the 2021 reported value.

UHS had expected adjusted earnings per share for 2022 in the range of $9.60 to $10.40, the midpoint of which suggests a 15.4% decline from its 2021 reported value.

How are the estimates moving since then?

It turns out that the revised estimates trended downwards over the past month.

The consensus estimate changed -7.19% due to these changes.

VGM Scores

Universal Health Services currently has a good Growth Score of B, although it lags far behind the Momentum Score with an F. However, the stock received an A grade on the value side, placing it in the top 20%. best for this investment strategy.

Overall, the stock has an aggregated VGM score of B. If you’re not focused on a strategy, this score is the one you should be interested in.

Panorama

Estimates have largely been to the downside for the stock, and the magnitude of these revisions indicate a downward shift. Notably, Universal Health Services has a Zacks Rank #3 (Hold). We expect an in-line return on the stock in the coming months.

Industry player performance

Universal Health Services belongs to Zacks Medical – Hospital industry. Another stock in the same sector, HCA Healthcare (HCA), gained 9.1% last month. More than a month has passed since the company released results for the quarter ended September 2022.

HCA posted revenues of $14.97 billion in the last reported quarter, representing a -2% year-over-year change. EPS of $3.93 for the same period compares to $4.57 a year earlier.

For the current quarter, HCA expects to post earnings of $4.76 per share, indicating a +7.7% change from the year-ago quarter. The Zacks consensus estimate has changed -0.1% over the last 30 days.

HCA has a Zacks Rank #3 (Hold) based on the general direction and magnitude of the estimate revisions. Additionally, the stock has a VGM score of B.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

Universal Health Services (SUS) increased by 18.5% since the last revenue report: can it continue?

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