Universal Health (UHS) Q3 Earnings Beat on Adjusted Patient Days
Universal Health Services, Inc. UHS posted robust third-quarter performance, thanks to an expanding patient base at its acute care and behavioral health care facilities, resulting in substantial contributions from these segments. Increased same-facility-adjusted patient days also contributed positively to the outcomes. Nevertheless, the upside was partly offset by rising expenses related to salaries, wages and benefits.
UHS reported third-quarter 2023 adjusted earnings per share (EPS) of $2.55, which beat the Zacks Consensus Estimate by 9%. The bottom line climbed a penny from the year-ago period.
Net revenues amounted to $3.6 billion in the quarter under review, which rose from $3.3 billion a year ago. The top line outpaced the consensus mark by 0.9%.
Universal Health Services, Inc. Price, Consensus and EPS Surprise
Universal Health Services, Inc. price-consensus-eps-surprise-chart | Universal Health Services, Inc. Quote
Quarterly Operational Update
Adjusted EBITDA net of NCI declined 1.5% year over year to $421.5 million in the third quarter but came higher than our estimate of $407.3 million.
Total operating costs of $3.3 billion increased 7.1% year over year and were in line with our estimate. The figure rose due to higher salaries, wages and benefits, other operating expenses, supplies costs and lease and rental expenses.
Segmental Update
Acute Care Hospital Services
In the third quarter, adjusted admissions (adjusted for outpatient activity) advanced 6.8% year over year on a same-facility basis. Adjusted patient days rose 3.8% year over year. Net revenues stemming from Universal Health’s acute care services improved 7.5% year over year on a same-facility basis.
Behavioral Health Care Services
Adjusted admissions grew 0.8% year over year on a same-facility basis in the quarter under review, marginally lower than our estimate of 0.9% growth. Meanwhile, adjusted patient days inched up 1.1% year over year, higher than our model estimate of 1%. On a same-facility basis, net revenues derived from the behavioral healthcare services of UHS increased 7.6% year over year.
Financial Update (as of Sep 30, 2023)
Universal Health exited the third quarter with cash and cash equivalents of $80.8 million, which plunged from the $102.8 million level at 2022 end. As part of the $1.2 billion revolving credit facility of UHS, net of outstanding borrowings and letters of credit, there remains an aggregate available borrowing capacity of $721 million at the third-quarter end.
Total assets of $13.9 billion increased from the 2022-end figure of $13.5 billion.
Long-term debt amounted to $4.8 billion, which increased from the figure of $4.7 billion as of Dec 31, 2022. Current maturities of long-term debt totaled $126.6 million.
Total equity increased from the 2022-end level of $6 billion to $6.1 billion.
In the first nine months of 2023, UHS generated cash flows from operations of $815.4 million, which climbed from the prior-year comparable period’s $698.7 million. The growth came on the back of favorable other working capital accounts.
Share Repurchase Update
Universal Health bought back shares worth roughly $175.1 million in the third quarter. It had a leftover repurchase capacity of around $580 million as of Sep 30, 2023.
2023 Guidance
Management earlier forecasted net revenues to be between $14,130 million and $14,330 million for this year. The midpoint of the outlook implies 6.2% growth from the 2022 reported figure.
Adjusted EBITDA, net of NCI, was estimated to be $1,696-$1,756 million. The midpoint of the guidance suggests a 3.9% improvement from the 2022 figure. UHS projected adjusted EPS in the range of $9.85-$10.50. The midpoint of the forecast indicates a rise of 3% from the 2022 figure.
Depreciation and amortization were anticipated at $584.7 million. Interest expenses were estimated at around $199 million. Earlier, capital expenditures were expected within $725 million and $875 million for 2023.
Zacks Rank & Key Picks
Universal Health currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Medical space are Acadia Healthcare Company, Inc. ACHC, Select Medical Holdings Corporation SEM and Molina Healthcare, Inc. MOH, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Acadia Healthcare’s current-year earnings implies a 13% increase from the year-ago reported figure. The consensus mark for its current year revenues indicates 10.5% growth from a year ago. ACHC beat earnings estimates in two of the last four quarters, met once and missed on one occasion, with an average surprise of 2.8%.
The Zacks Consensus Estimate for Select Medical’s 2023 earnings indicates a 56.9% year-over-year increase to $1.93 per share. It has witnessed one upward estimate revision over the past 30 days against no movement in the opposite direction. The consensus mark for SEM’s 2023 revenues indicates 4.2% growth from a year ago.
The Zacks Consensus Estimate for Molina Healthcare’s 2023 bottom line is pegged at $20.79 per share, suggesting 16% year-over-year growth. It beat earnings estimates in all the last four quarters, with an average surprise of 7.2%. The consensus mark for MOH’s current year revenues indicates 3.4% growth from a year ago.
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