Select Medical (SEM) Up 21% Year to Date: More Room to Run?
Shares of Select Medical Holdings Corporation SEM have gained 21.4% year to date against the industry’s 14.9% decline. The Medical sector fell 4.8% but the S&P 500 composite index rallied 17.3% in the same time frame. With a market capitalization of $3.8 billion, the average volume of shares traded in the last three months were 0.6 million.
Image Source: Zacks Investment Research
Sustained top-line growth, active pursuit of buyouts and joint ventures, coupled with a strong financial stand, continue to drive Select Medical.
The expected long-term earnings growth rate of SEM is pegged at 15%, better than the industry’s average of 13.4%.
Can SEM Retain the Momentum?
The Zacks Consensus Estimate for Select Medical’s 2023 earnings is pegged at $1.84 per share, indicating a 49.6% increase from the 2022 figure. The same for revenues stands at $6.5 billion, suggesting a 3.1% increase from the year-ago figure.
The consensus mark for 2024 earnings is pegged at $2.34 per share, suggesting an improvement of 26.8% from the 2023 estimate. The same for revenues stands at $6.8 billion, hinting at a 4% increase from the 2023 estimate.
After witnessing a 7.9% CAGR over the past decade (2012-2022), revenues of Select Medical improved 4.1% year over year in the first quarter of 2023 on the back of growing patient volumes. Increased confidence of people to opt for outpatient visits is likely to provide an impetus to the performance of its Outpatient Rehabilitation and Concentra segments.
Management forecasts revenues within $6.5-$6.7 billion in 2023, the midpoint of which indicates an improvement of 4.8% from the 2022 figure. The dire need for effective rehabilitation services that empower individuals recovering from chronic illness and injuries to resume daily life activities is expected to provide SEM an opportunity to capitalize on through its rehabilitation hospitals.
Select Medical resorts to an inorganic growth strategy, in which it acquires healthcare facilities or enters into joint ventures with several U.S. healthcare providers. Such initiatives build up capabilities, bolster the healthcare portfolio and expand the geographical presence of this Zacks Rank #3 (Hold) leading U.S. healthcare facility operator.
SEM’s care network comprised 105 critical illness recovery hospitals, 32 rehabilitation hospitals and 1,936 outpatient rehabilitation clinics spread across the United States and the District of Columbia as of Mar 31, 2023.
A sound financial position provides a cushion for Select Medical to pursue uninterrupted growth-related initiatives. Its growing cash reserves and solid cash-generating abilities empower it to invest funds for boosting growth prospects as well as engage in prudent deployment of capital via share buybacks and dividends. Its dividend yield of 1.7% remains higher than the industry’s average of 1.4%.
Select Medical boasts an impressive VGM Score of B. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.
Stocks to Consider
Some better-ranked stocks in the Medical space are Alcon Inc. ALC, DexCom, Inc. DXCM and HCA Healthcare, Inc. HCA. While Alcon currently sports a Zacks Rank #1 (Strong Buy), DexCom and HCA Healthcare carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alcon’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and matched the mark once, the average beat being 8.85%. The Zacks Consensus Estimate for ALC’s 2023 earnings suggests an improvement of 17.9%, while the same for revenues indicates growth of 8% from the respective year-ago reported figures.
The consensus estimate for ALC’s 2023 earnings has moved 0.4% north in the past 60 days. Shares of Alcon have gained 23.9% year to date.
DexCom’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and matched the mark once, the average surprise being 15.19%. The consensus estimate for DXCM’s 2023 earnings indicates a rise of 23%, while the same for revenues suggests an improvement of 20.1% from the corresponding year-ago reported estimates.
The consensus estimate for DXCM’s 2023 earnings has moved 0.9% north in the past 30 days. Shares of DexCom have gained 20% year to date.
HCA Healthcare’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, the average surprise being 9.04%. The Zacks Consensus Estimate for HCA’s 2023 earnings suggests an improvement of 7.2%, while the same for revenues indicates growth of 5.3% from the respective year-ago reported figures.
The consensus estimate for HCA’s 2023 earnings has moved 0.1% north in the past 30 days. Shares of HCA Healthcare have rallied 23.7% year to date.
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
Alcon (ALC) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report
Select Medical Holdings Corporation (SEM) : Free Stock Analysis Report
