Here's Why You Should Retain Universal Health (UHS) Stock Now
Universal Health Services, Inc. UHS is aided by improved patient volumes, an expanding healthcare portfolio and a commendable financial position. A favorable business outlook for 2023 reinforces investors’ confidence in the stock.
Zacks Rank & Price Performance
Universal Health currently carries a Zacks Rank #3 (Hold).
The stock has soared 38% in a year compared with the industry’s 26.8% growth. The Zacks Medical sector has declined 2.3% in a year. However, the S&P 500 Composite has risen 17.5% in the same time frame.
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Rising Estimates
The Zacks Consensus Estimate for Universal Health’s 2023 earnings per share (EPS) is pegged at $10.27, indicating growth of 4% from the prior-year reported figure. The consensus mark for revenues stands at $14.2 billion, implying a rise of 5.9% from the year-ago reported number.
The consensus mark for 2024 EPS is pegged at $11.58, suggesting an improvement of 12.8% from the 2023 estimate. The same for revenues stands at $14.8 billion, hinting at a 4.3% increase from the 2023 estimate.
Universal Health’s bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 4.7%.
A Strong View for 2023
UHS forecasts revenues to lie between $14,130 million and $14,330 million in 2023, the midpoint of which indicates roughly a 6.2% increase from the 2022 level.
Adjusted EPS is projected to be between $9.85 and $10.50 this year, the midpoint of which suggests 3% growth from the 2022 figure.
Key Drivers
After witnessing a CAGR of 7.6% over the past 12 years (2010-2022), the top line of Universal Health improved 6% in the first half of 2023. The top line continues to benefit from an expansive care network and solid contributions from the Acute Care Hospital Services and Behavioral Health Care Services segments. The company aims to open a 150-bed de novo acute care hospital in the next fall. It also expects to open 150-bed and 136-bed hospitals in Florida and Washington D.C., respectively, fueling top-line growth.
Universal Health’s diversified treatment network comprises 358 inpatient facilities and 42 outpatient and other facilities stretched throughout 39 states, Washington, D.C., the U.K. and Puerto Rico as of Jun 30, 2023.
Higher admissions and longer patient stays also contribute favorably to the segments’ performance. Continuous incidence of mental health issues among Americans is likely to sustain the solid demand for UHS’s behavioral healthcare services in the days ahead.
Management of UnitedHealth Group UNH signaled toward resuming pent-up elective procedures at the Goldman Sachs Global Healthcare Conference held in June 2023. This brings hope for healthcare facility operators like UHS, whose revenues suffered due to a temporary pause exerted on elective surgeries to treat the escalating number of COVID cases.
UHS consistently resorts to service launches, upgradation of existing services, physician recruitment and exerting financial and operational controls to boost the operating revenues and profitability of owned hospitals. It also relies on acquisitions for strengthening its healthcare delivery capabilities and gaining access to new markets.
The healthcare provider does not shy away from selling assets or businesses that do not provide an impetus to its growth or operating strategy.
Universal Health boasts a solid financial standing backed by a strong cash balance and adequate cash-generating abilities. For the six months ended June 30, 2023, UHS’s operating cash flows increased 36.7% year over year. UHS leverages its financial strength to undertake growth-related initiatives and engage in active capital deployment records to shareholders.
The leverage ratio of UHS is improving. Its total debt- to total capital of 43.5% at the first-quarter end remains significantly lower than the industry’s average of 94%.
Stocks to Consider
Some better-ranked stocks in the medical space are Encompass Health Corporation EHC and Atai Life Sciences N.V. ATAI. Encompass Health sports a Zacks Rank #1 (Strong Buy), while Atai Life Sciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Encompass Health’s 2023 earnings indicates a 21.1% year-over-year increase to $3.45 per share. It has witnessed one upward estimate revision over the past 30 days against one movement in the opposite direction. It beat estimates in three of the past four quarters, missing once, with the average surprise being 14%.
The Zacks Consensus Estimate for Atai Life Sciences’ current-year earnings indicates a 16.3% improvement from the year-ago reported figure. It has witnessed four upward estimate revisions over the past 60 days against no movement in the opposite direction. ATAI beat earnings estimates in two of the last four quarters, met once and missed on the other occasion.
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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Universal Health Services, Inc. (UHS) : Free Stock Analysis Report
atai Life Sciences N.V. (ATAI) : Free Stock Analysis Report
Encompass Health Corporation (EHC) : Free Stock Analysis Report
