Select Medical (SEM) Q2 Earnings Meet, Revenues Rise Y/Y
Select Medical Holdings Corporation SEM reported second-quarter 2023 adjusted earnings of 61 cents per share, which met the Zacks Consensus Estimate. The bottom line climbed 44% year over year.
Net operating revenues improved 5.7% year over year to $1,674.5 million in the quarter under review. The metric beat the consensus mark by 4.6%.
The quarterly results gained from solid contributions to revenue growth from four of its segments. The units benefited on the back of improved patient volumes and outpatient visits. However, the upside was partly offset by an escalating expense level.
Total costs and expenses of $1,516.1 million increased 2.5% year over year in the second quarter and came higher than our estimate of $1,470.9 million. The increase was due to elevated cost of services, exclusive of depreciation and amortization, coupled with higher general and administrative expenses.
Adjusted EBITDA advanced 21.3% year over year to $219.5 million, higher than our estimate of $194.3 million.
Select Medical Holdings Corporation Price, Consensus and EPS Surprise
Select Medical Holdings Corporation price-consensus-eps-surprise-chart | Select Medical Holdings Corporation Quote
Segmental Update
Critical Illness Recovery Hospital
The segment reported revenues of $575.1 million in the second quarter, which improved 5.3% year over year and outpaced our estimate of $545.8 million. The growth came on the back of a 1.4% rise in admissions and a 1.2% increase in patient days in the segment.
Adjusted EBITDA increased more than three-fold year over year to $65.5 million, higher than our estimate of $54.9 million. Adjusted EBITDA margin of 11.4% improved 770 basis points (bps) year over year in the quarter under review.
Rehabilitation Hospital
The segment’s revenues of $240.9 million grew 5.2% year over year and surpassed our estimate of $233.6 million. The improvement can be attributed to 5.6% growth in admissions and 0.8% increase in patient days.
Adjusted EBITDA came in at $54.7 million, which advanced 9.7% year over year in the second quarter and beat our estimate of $53.9 million. Adjusted EBITDA margin improved 90 bps year over year to 22.7%.
Outpatient Rehabilitation
Revenues of the segment amounted to $303 million in the quarter under review, which rose 5.5% year over year and outpaced our estimate of $291.9 million. The growth stemmed from 11% rise in patient visits.
Adjusted EBITDA declined 2.2% year over year to $32.9 million but came higher than our estimate of $25 million. Adjusted EBITDA margin of 10.8% deteriorated 90 bps year over year.
Concentra
The segment recorded revenues of $467.1 million in the second quarter, which improved 5.8% year over year and beat our estimate of $440.4 million. A year-over-year increase of 1.7% in visits drove the unit’s results.
Adjusted EBITDA rose 8.4% year over year to $100.4 million, higher than our estimate of $84 million. Adjusted EBITDA margin of 21.5% improved 50 bps year over year.
Financial Position (as of Jun 30, 2023)
Select Medical exited the second quarter with cash and cash equivalents of $101.2 million, which increased 3.3% from the figure at 2022 end. Total assets of $7,701.9 million inched up 0.5% from the 2022-end level.
SEM had $248.8 million left under its revolving facility as of Jun 30, 2023.
Long-term debt, net of current portion, amounted to $3,695.3 million, which fell 3.6% from the figure as of Dec 31, 2022.
Total equity of $1,501.6 million grew 10.7% from the figure at 2022 end.
SEM generated cash flow from operations of $234.8 million in the reported quarter, which climbed 36.8% year over year.
Share Repurchase & Dividend Update
In the second quarter, Select Medical did not buy back shares pursuant to the $1 billion authorized share repurchase program, which is set to expire on Dec 31, 2023.
On Aug 2, 2023, management approved a cash dividend of 12.5 cents per share. The dividend will be paid out on Sep 1, 2023 to its shareholders of record as of Aug 15.
2023 Business Outlook Updated
Management presently anticipates revenues within $6.55-$6.7 billion, compared with the earlier guidance of $6.5-$6.7 billion. The midpoint of the revised outlook indicates an improvement of 4.7% from the 2022 figure.
Adjusted EBITDA is estimated to lie between $795 million and $825 million in 2023, higher from the previous outlook of $780-$820 million. The midpoint of the updated guidance implies 25.2% growth from the 2022 figure.
SEM forecasts adjusted earnings per share within $1.86-$2.03 for this year.
Zacks Rank
Select Medical currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported second-quarter 2023 results so far, the bottom-line results of Envista Holdings Corporation NVST, Penumbra, Inc. PEN and IDEXX Laboratories, Inc. IDXX beat the Zacks Consensus Estimate.
Envista reported second-quarter 2023 adjusted earnings per share (EPS) of 43 cents, down 10.4% year over year. The bottom line topped the Zacks Consensus Estimate by 4.9%. Revenues of NVST totaled $662.4 million in the reported quarter, up 2.6% year over year. The metric topped the consensus estimate by 1.8%. In the second quarter, Speciality Products & Technologies segment’s revenues totaled $417 million, up 2.3%. Gross profit for the reported quarter rose 14.5% year over year to $423.6 million. The gross margin expanded 669 bps to 63.9%. The operating margin of NVST expanded 861 bps to 18.7%.
Penumbra’s second-quarter 2023 adjusted EPS of 43 cents beat the Zacks Consensus Estimate of 28 cents by a huge 53.6%. The company had recorded an adjusted income of 1 cent per share in the year-ago period. PEN registered revenues of $261.5 million in the reported quarter, up 25.5% year over year on a reported basis as well as at constant exchange rate or CER. The figure also surpassed the consensus estimate by 3.3%. It registered revenues of $152.7 million from sales of vascular products, up 23.6% reportedly and 23.7% at CER from the prior-year level. Adjusted operating income of PEN amounted to $17.9 million against the prior-year quarter’s reported loss of $0.1 million.
IDEXX Laboratories posted second-quarter 2023 EPS of $2.67, a 71.2% surge year over year. The figure surpassed the Zacks Consensus Estimate by 9.9%. Second-quarter revenues of IDXX increased 9.7% year over year to $943.6 million. Organically, growth was 10%. The metric exceeded the consensus estimate by 1.7%. Veterinary software, services and diagnostic imaging systems’ revenues increased 12% on a reported basis and 13% organically, reflecting continued high growth in recurring revenues and strong quarterly placements of cloud-based software solutions. The overall operating margin of IDXX in the quarter expanded 1058 bps to 31.4%.
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