Will Admissions Drive Universal Health's (UHS) Q4 Earnings?
Universal Health Services, Inc. UHS is set to report fourth-quarter 2017 results on Feb 28 after market close.
Last quarter, the company reported adjusted earnings of $1.64 per share, having missed the Zacks Consensus Estimate by 3.5%. The bottom line, however, grew 2.5% year over year on higher revenues.
Let’s see, how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Universal Health has the right combination of two key ingredients to beat estimates this quarter.
Zacks ESP: Universal Health has an Earnings ESP of +0.39%. 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
Universal Health Services, Inc. Price and EPS Surprise | Universal Health Services, Inc. Quote
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.
Both segments of Universal Health namely Acute Care and Behavioral Health, have been delivering strong results over the past many quarters. Notably, the segments have also been continuously witnessing a rise in admissions, licensed beds and patient days, leading to higher revenues in turn. Moreover, the fourth quarter is likely to have experienced this favorable trend.
The Zacks Consensus Estimate for total revenues in the to-be-reported quarter is pegged at $2.6 billion, reflecting year-over-year growth of 6%. Our consensus estimate for revenues from Acute Care and Behavioral Health segments stands at $1.4 billion and $1.2 billion, up 6% and 6.7% respectively, year over year.
The average number of licensed beds in the Acute Care hospitals and Behavioral Health centers kept increasing since 2012. Our consensus estimate for Average Licensed Beds in Acute Care and Behavioral Health is pegged at 6.1 billion and 23.1 billion, up 0.5% and 5.7% year over year, respectively.
An increase in number of beds at both the facilities will likely drive up admission volumes. The Zacks Consensus Estimate for Admissions in Acute Care and Behavioral Health is pegged at 73.2 billion and 116.3 billion respectively, up 5.4% and 4.7% year over year, respectively.
In addition, the company’s continuous focus to enhance shareholders’ value through share repurchases might have boosted its bottom line by limiting share count in the fourth quarter.
However, rising costs related to interest payment, reserves for settlements, legal judgments and lawsuits plus impairments of long-lived assets are likely to have weighed on margins.
Other Stocks to Consider
Here are some other stocks worth considering from the medical sector with the right combination of elements to also come up with an earnings beat this time around:
Aerie Pharmaceuticals, Inc. AERI is set to report fourth-quarter earnings on Feb 28. The company has an Earnings ESP of +41.20% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Bio-Rad Laboratories, Inc. BIO, which is set to release fourth-quarter earnings on Feb 27, has an Earnings ESP of +2.61% and a Zacks Rank of 2 .
DexCom, Inc.DXCM has an Earnings ESP of +126.47% and is a Zacks #3 Ranked player. The company is set to announce fourth-quarter earnings on Feb 27.
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