Universal Health (UHS) Up 5.3% in 6 Months: More Room to Run?
Shares of Universal Health Services, Inc. UHS have gained 5.3% in the past six months compared with the industry’s 1.8% growth. With a market capitalization of $10.7 billion, the average volume of shares traded in the last three months was 0.5 million.
Improved patient volumes, an expansive care network and a commendable financial position continue to drive Universal Health.
The leading U.S. healthcare services provider with a current Zacks Rank #2 (Buy) boasts an impressive track record of beating estimates in each of the trailing four quarters, the average surprise being 5.5%.
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Can UHS Retain the Momentum?
The Zacks Consensus Estimate for Universal Health’s 2023 earnings is pegged at $10.34 per share, indicating a 4.7% increase from the year-ago reported figure. The consensus mark for revenues is $14.2 billion, suggesting 6.2% growth from the year-ago number.
The Zacks Consensus Estimate for 2024 earnings is pegged at $11.94 per share, which implies a 15.5% improvement from the 2023 estimate. The consensus mark for revenues is $14.9 billion, suggesting 4.4% growth from the 2023 estimate.
Growing patient volumes and higher patient days continue to aid the performance of Acute Care Hospital Services and Behavioral Health Care Services segments, which in turn, contribute to the overall revenue growth of Universal Health. The company has begun experiencing acute care volumes similar to those of the pre-pandemic levels, poising it well for growth in the future. Strong pricing, improved retention and recruitment metrics will aid the Behavioral segment’s revenues in the future. Management anticipates net revenues between $14.130 and $14.330 billion in 2023, the midpoint of which indicates a 6.2% rise from the 2022 reported figure.
Rising mental health issues among Americans are expected to sustain the solid demand for UHS’s behavioral health hospitals in the days ahead. The resumption of elective procedures, which had been earlier delayed to treat a humongous COVID-19 patient base, may fetch higher revenues for Universal Health’s surgery centers.
As a means to boost the operating revenues and profitability of its owned hospitals, Universal Health launches services, upgrades existing ones, recruits capable physicians and exerts financial and operational controls.
The healthcare services provider pursues a strategy of purchasing, constructing, or leasing hospital facilities, which, in turn, enables it to foray into new markets, enhance healthcare delivery capabilities and diversify its treatment network. In the first nine months of 2023, UHS spent $3.7 million on the acquisition of businesses and property.
Universal Health’s healthcare portfolio comprised 358 inpatient facilities and 43 outpatient and other facilities stretched throughout 39 states, Washington, D.C., the UK and Puerto Rico as of Sep 30, 2023.
A solid financial standing is a dire need to pursue business investments and that’s exactly the case with Universal Health. A sound cash balance and robust cash-generating abilities are a testament to UHS’s financial strength. It generated operating cash flows of $815.4 million in the first nine months of 2023, which improved 16.7% year over year. It also distributes capital to shareholders through share repurchases and dividend payments.
However, the medical industry is grappling with high labor costs, which are impacting its margins. UHS’s physician expenses are running close to 7.6% in 2023, higher than 6% in the pre-pandemic period. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.
Other Stocks to Consider
Some other top-ranked stocks to consider in the broader medical space are Insulet Corporation PODD, Integer Holdings Corporation ITGR and Acadia Healthcare ACHC. Each of these companies presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Insulet’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 105.1%. The Zacks Consensus Estimate for PODD’s 2023 earnings is pegged at $1.97 per share, which indicates a more than 27-fold increase from the year-ago reported figure. The consensus mark for revenues indicates growth of 25.9% from the year-ago reported figure.
The Zacks Consensus Estimate for PODD’s 2023 earnings has moved 0.5% north in the past 60 days. Shares of Insulet have gained 46.1% in the past three months.
Integer Holdings has an estimated long-term growth rate of 15%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12%.
Integer Holdings’ shares have rallied 44.1% in the past three months compared with the industry’s 21.4% growth.
Acadia Healthcare’s long-term earnings are expected to grow at 11.5%. ACHC’s earnings surpassed estimates in three of the trailing four quarters, missing once, delivering an average surprise of 3.6%.
Acadia’s shares have gained 15.3% in the past six months compared with the industry’s growth of 1.8%.
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