U.S. markets closed
  • S&P Futures

    +5.25 (+0.12%)
  • Dow Futures

    +78.00 (+0.22%)
  • Nasdaq Futures

    -10.75 (-0.07%)
  • Russell 2000 Futures

    +5.60 (+0.25%)
  • Crude Oil

    +0.63 (+0.85%)
  • Gold

    -1.80 (-0.10%)
  • Silver

    +0.01 (+0.02%)

    -0.0022 (-0.19%)
  • 10-Yr Bond

    +0.0500 (+3.55%)
  • Vix

    -0.88 (-4.72%)

    -0.0050 (-0.37%)

    +0.4500 (+0.41%)

    +697.91 (+1.63%)
  • CMC Crypto 200

    -35.86 (-3.25%)
  • FTSE 100

    -26.87 (-0.38%)
  • Nikkei 225

    +609.41 (+2.06%)

Here's Why You Should Hold on to Universal Health (UHS) Now

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·5 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Universal Health Services, Inc. UHS has been gaining momentum from its strategic measures and strong segmental contributions for a while now. A solid financial standing also reinforces the stock’s growth prospects.

The company has witnessed its current-year earnings estimate move 3.4% north over the past 60 days.

Its favorable VGM Score of A is a testament to the same. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

Here we discuss the reasons for retaining this currently Zacks Rank #3 (Hold) company in your investment portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Most hospital companies suffered declining admissions due to the COVID-19 pandemic. There were regulations to abide by, which not only affected revenues but also flared up expenses. However, things are now looking up for the hospital companies. In this regard, it should be noted how Universal Health took several measures to sail through the troubled phase.

Both segments, namely, Acute-care Platform and Behavioral Platform contributed to the company’s growth over the years. The company’s revenues have been rising since 2010. During 2020, net revenues grew 1.6% year over year, particularly owing to higher revenues reported across both the company’s segments. In the first quarter of 2021, the same increased 6.5% year over year, driven by an uptick in revenues across the company’s acute care and behavioral health care facilities. In 2020, Universal Health instated 439 beds at its acute care and behavioral health hospitals.

The company’s series of accretive buyouts also deserves a mention. The company’s inorganic growth profile played a key role in establishing its growth trajectory. Last year, it spent $52 million on the acquisition of businesses and property. We believe that the company will continue making acquisitions that will help expand its domestic and international presence as well as position it better to weather the regulatory uncertainties in the healthcare sector.

People are suffering depression, anxiety and substance abuse due to unemployment, financial turmoil, etc. Universal Health focuses on behavioral indications like eating disorders, sexual trauma, autism as well as disorderliness in the military through its patriot support program.

Since 2012, average licensed beds in the behavioral health centers have been growing, contributing to the company’s top line. During 2020 and the first quarter of 2021, the same inched up 0.6% and 0.9% year over year, respectively. Though the segment’s patient days were adversely impacted in light of the suspended elective and scheduled procedures, the company left no stone unturned in boosting its behavioral health portfolio through joint ventures.

The leading hospital company’s Acute care platform, which is a branch of secondary healthcare wherein a patient receives short-term treatment for urgent medical conditions, has been performing well since 2012. In fact, global market sentiments for acute care treatments are quite upbeat with North America accounting for the largest share in the space. During 2020 and the first quarter of 2021, net revenues from this segment rose 3% and 11.7%, respectively, year over year.

The company's balance sheet position also remains a positive. Its debt-to-total capitalization ratio as of Mar 31, 2021 came in at 35.4, which compares favorably with the industry’s figure of 90. Also, its times interest earned stands at 15.5X, much higher than the industry’s average of 4.2X. As of Mar 31, 2021, it had cash and cash equivalents of $764.5 million, higher than the current portions of long-term debt of $10.7.8 million. Thus, its financial flexibility is impressive.

However, steep increase in operating expenses has been a major concern for the company since 2013. The same trend followed in 2020 as well wherein operating expenses inched up 0.4% from the 2019-end level and reflected 88.2% of the total revenues. In the first quarter of 2021, the operating expenses increased 4.8% year over year.

Shares of the company have gained 52.7% in a years’ time, underperforming its industry's growth of 99.4%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the same space are Magellan Health, Inc. MGLN, Tenet Healthcare Corporation THC and Encompass Health Corporation EHC. While Magellan Health sports a Zacks Rank of 1, Tenet Healthcare and Encompass Health hold a Zacks Rank #2 (Buy), presently.

Magellan Health, Tenet Healthcare and Encompass Health managed to deliver a trailing four-quarter surprise of 69.6%, 106.4% and 5.7%, respectively, on average.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Universal Health Services, Inc. (UHS) : Free Stock Analysis Report

Tenet Healthcare Corporation (THC) : Free Stock Analysis Report

Magellan Health, Inc. (MGLN) : Free Stock Analysis Report

Encompass Health Corporation (EHC) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research