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Universal Health (UHS) Q3 Earnings, Revenues Lag Estimates

Zacks Equity Research

Universal Health Services Inc. UHS reported third-quarter 2017 adjusted earnings of $1.64 per share that missed the Zacks Consensus Estimate by 3.5%. Earnings, however, grew 2.5% year over year.

Including one-time items like (i) an unfavorable after-tax impact of approximately 9 cents to 10 cents per diluted share, stemming from the hurricane expenses and estimated business interruption impact incurred by 28 behavioral health care facilities and three acute care hospitals located in Florida, (ii) an after-tax charge of 5 cents per diluted share related to a court order in Texas related to certain litigation and (iii) 1 cent of favorable impact of ASU 2016-09 and (iv) 3 cents of unfavorable after-tax impact of items related to Electronics Health Records, net income per share comes at $1.47 for the third quarter, down 4.5% year over year.

Net revenues increased 5.5% year over year to $2.54 billion. It, however, missed the Zacks Consensus Estimate by 2%.

Total operating expenses of $2.3 billion at the end of the third quarter also increased 7.1% year over year.

Segment Update

Acute Care Hospitals:

Adjusted admissions and adjusted patient days increased 3.5% and 1.5%, respectively, from the prior-year quarter. Net revenues from acute care services climbed 2.2% in the third quarter.

Behavioral hospitals:

On a same facility basis, adjusted admissions increased 1.1% while adjusted patient days declined 0.2%, both on a year-over-year basis. Net revenues increased 1.8% during the quarter on a same facility basis.

Universal Health Services, Inc. Price, Consensus and EPS Surprise

Universal Health Services, Inc. Price, Consensus and EPS Surprise | Universal Health Services, Inc. Quote

Financial Update

As of Sep 30, 2017, the company had cash and cash equivalents of nearly $65.4 million, up 94% from year-end 2016.

Total assets were $10.6 billion as of Sep 30, 2017, up 3.1% from year-end 2016.

The company managed to lower its debt burden, as evident from its long-term debt of $3.9 billion as of Sep 30, 2017 that declined 1% from year-end 2016.

For the first nine months of2017, net cash provided by operating activities decreased 23% to $878 million year over year.  The downside stemmed from a $128 million unfavorable change in cash flows from foreign currency forward exchange contracts and a $101 million unfavorable change in other working capital accounts.

Buyback Program

In February 2016, the board of directors authorized a $400 million increase to Universal Health’s stock repurchase program, which raised the aggregate authorization to $800 million from $400 million during third-quarter 2014. 

Concurrently, during the third quarter, the company repurchased 870,000 shares at an aggregate cost of $94.3 million.

During the first nine months of 2017, the company repurchased approximately 1.96 million shares at an aggregate cost of approximately $221.4 million

Lowered 2017 Guidance

Based on the operating trends and financial results during the first nine months of 2017, the company has lowered its earnings guidance.

The company now expects adjusted net income per share for 2017 to be within $7.25 to $7.50 against the previously guided range of $7.50 to $8.00.

Zacks Rank & Performance of Peers

Universal Health presently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the other firms in the medical sector that have reported their third-quarter earnings so far, the bottom line at Centene Corp. CNC, Anthem Inc ANTM and UnitedHealth Group Inc. UNH beat their respective Zacks Consensus Estimate.

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