Universal Health Services Inc. UHS has been suffering for long due to coronavirus-induced business loss.
The Zacks Consensus Estimate for the bottom line of $6.32 for the current year has moved 10.5% south over the past 30 days, indicative of analysts’ bearish sentiment on the stock.
Shares of this Zacks Rank #5 (Strong Sell) company have lost 32.3% year to date, marginally narrower than its industry's decline of 32.9%.
This price performance also underperforms the stock movements of other companies in the same space. While Community Health Systems, Inc. CYH has gained 11%, both Acadia Healthcare Company Inc. ACHC and HCA Healthcare Inc. HCA have lost 18.5% and 32%, respectively in the same time frame.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
So, let’s dig deep to ascertain the reasons for investors’ pessimism.
In the first quarter of 2020, the company came up with adjusted earnings of $1.73 per share, missing the Zacks Consensus Estimate by 33.2%.
Moreover, the bottom line deteriorated 29.4% year over year. Results were hurt by a pre-tax unrealized loss of $4.3 million due to a decline in market value of shares of certain marketable securities.
In Acute Care hospitals, adjusted admissions and adjusted patient days were down 4% and 0.2%, respectively, from the prior-year quarter. In Behavorial hospitals, adjusted admissions and adjusted patient days dipped 2% and 1.3%, respectively, year over year on same-facility basis.
Moreover, the company has seen a steep increase in operating expenses over the past many years. In 2019, it rose 6% year over year to $10 billion, accounting for 89.3% of the total revenue stream, which remains a major concern for the company. In the first quarter, expenses were up 7.1% year over year, reflecting 93.2% of total revenues. Rising expenses are likely to drain the company's margin going forward.
The company withdrew its 2020 outlook, given the current unprecedented environment. This remains a major downside for investors. Moreover, it suspended its share buyback program and dividend payout due to current market uncertainty.
Universal Health’s return on equity has been declining since 2015. The metric presently stands at 14.9%, much lower than its industry's average of 454%. This waning profitability measure also reflects the company’s ineffectiveness in utilizing shareholders’ money.
The company's 2020 earnings estimate stands at $6.32 while the same for current-year revenues is pegged at $10.74 billion, both implying a fall of 36.7% and 5.8% each from the year-ago reported figures.
Its long-term growth rate of 6.70% is projected below the industry's average of 7.10%.
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Universal Health Services, Inc. (UHS) : Free Stock Analysis Report
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