Universal Health (UHS) Q4 Earnings Beat on Adjusted Admissions
Universal Health Services, Inc. UHS reported fourth-quarter 2023 adjusted earnings per share (EPS) of $3.13, which beat the Zacks Consensus Estimate by 3.6%. The bottom line climbed 3.6% year over year from the year-ago period.
Net revenues amounted to $3.7 billion in the quarter under review, which rose from $3.4 billion a year ago. The top line outpaced the consensus mark by 1.3%.
The strong quarterly results of UHS were supported by a growing patient base at its acute care and behavioral health care facilities, resulting in substantial contributions from these segments, and 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.
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 rose 0.4% year over year to $473.4 million in the fourth quarter and came higher than our estimate of $446.9 million.
Total operating costs of $3.4 billion increased 5.9% year over year and came in higher than our estimate of $3.3 billion. 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 fourth quarter, adjusted admissions (adjusted for outpatient activity) advanced 5.6% year over year on a same-facility basis. Adjusted patient days rose 4.3% year over year. Net revenues stemming from Universal Health’s acute care services improved 9.7% year over year on a same-facility basis.
Behavioral Health Care Services
Adjusted admissions grew 1.4% year over year on a same-facility basis in the quarter under review. Meanwhile, adjusted patient days inched up 1.1% year over year, lower than our model estimate of 3.5%. On a same-facility basis, net revenues derived from the behavioral healthcare services of UHS increased 7.2% year over year.
Full-Year Update
In 2023, net revenues of $14.3 billion increased from $13.4 billion in 2022.
For the full-year 2023, the company reported adjusted EPS of $10.54, which increased from $9.88 in 2022.
Financial Update (as of Dec 31, 2023)
Universal Health exited the fourth quarter with cash and cash equivalents of $119.4 million, which increased from $102.8 million 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 $701 million at the fourth-quarter end.
Total assets of $14 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 $126.7 million.
Total equity increased from the 2022-end level of $6 billion to $6.2 billion.
In 2023, UHS generated cash flows from operations of $1.3 billion, which increased from the prior-year quarter of $1 billion. The growth came on the back of favorable other working capital accounts.
Share Repurchase Update
Universal Health bought back shares worth roughly $157.3 million in the fourth quarter. It had a leftover repurchase capacity of around $423 million as of Dec 31, 2023.
2024 Guidance
Management expects net revenues between $15.411 billion and $15.706 billion for 2024. The midpoint of the outlook implies 8.9% growth from the 2023 reported figure.
Adjusted EBITDA, net of NCI, is estimated to be in the range of $1.931-$2.019 billion. The midpoint of the guidance suggests a 13.4% improvement from the 2023 figure. UHS projects adjusted EPS in the range of $13-$14. The midpoint of the forecast indicates a rise of 28.1% from the 2023 figure.
Depreciation and amortization are anticipated to be $605.2 million. Interest expenses are estimated at around $196.3 million. Capital expenditures are expected to be between $850 million and $1 billion for 2024.
Zacks Rank & Key Picks
Universal Health currently has a Zacks Rank #3 (Hold). 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 fourth-quarter 2023 results so far, the bottom-line results of Zimmer Biomet Holdings, Inc. ZBH, Centene Corporation CNC and Intuitive Surgical, Inc. ISRG beat the Zacks Consensus Estimate.
Zimmer Biomet posted fourth-quarter 2023 adjusted EPS of $2.20, exceeding the Zacks Consensus Estimate by 2.3%. The adjusted figure increased 17% year over year. Fourth-quarter net sales of $1.94 billion increased 6.3% (up 6.1% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate by 0.5%. During the fourth quarter, sales generated in the United States totaled $1.13 billion (up 4.4% year over year), while International sales grossed $811.9 million (up 8.7% year over year at CER).
Sales in the Knees unit improved 5.6% year over year at CER to $798.3 million. Revenues in the S.E.T. unit were up 6.4% year over year at CER to $453.3 million. Other revenues increased 15.9% to $183.7 million at CER in the fourth quarter. Adjusted gross margin, after excluding the impact of intangible asset amortization, was 72.2%, reflecting an expansion of 74 bps in the fourth quarter. The adjusted operating margin of ZBH expanded 342 bps to 29.2% in the quarter.
Centene’s fourth-quarter 2023 adjusted EPS of 45 cents beat the Zacks Consensus Estimate by 4.7%. The bottom line declined 47.7% year over year. Revenues amounted to $39.5 billion, which improved 11% year over year. The top line outpaced the consensus mark by 9.6%. Revenues from Medicaid declined 1% year over year to $21.1 billion, while Medicare revenues fell 3% year over year to $5.3 billion. Meanwhile, commercial revenues jumped 68% year over year to $7.4 billion.
Premiums of Centene improved 7.4% year over year to $34.2 billion. CNC’s total membership was almost 27.5 million as of Dec 31, 2023, which increased 1.5% year over year but lagged our estimate of 27.8 million. The Health Benefits Ratio of 89.5% for the fourth quarter of 2023 was higher than the year-ago period’s 88.7%. It reported adjusted net earnings of $240 million, which declined from $485 million a year ago. Adjusted SG&A expense ratio increased to 9.7% in the fourth quarter from 9.3% a year ago.
Intuitive Surgical reported fourth-quarter 2023 adjusted EPS of $1.60, which beat the Zacks Consensus Estimate of $1.47 by 8.8%. The bottom line improved 30% year over year. It reported revenues of $1.93 billion, up 17% from the year-ago quarter’s recorded number. The top line also beat the consensus estimate by 3.2%. Revenues from the Instruments & Accessories segment totaled $1.14 billion, indicating a year-over-year improvement of 21.6%. The Systems segment’s revenues totaled $480.2 million, up 15.6% year over year. Intuitive Surgical shipped 415 da Vinci Surgical Systems compared with 369 in the year-ago quarter.
Revenues in the Systems and Services segments improved 5.6% and 3.9%, respectively, from their corresponding year-ago quarter’s level. Adjusted gross profit was $1.31 billion, up 16.1% year over year. As a percentage of revenues, the gross margin was 68%, down approximately 20 bps from the year-ago quarter’s figure. As a percentage of revenues, the operating margin was 35.8%, up approximately 20 bps from the year-ago quarter’s figure.
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