It has been about a month since the last earnings report for Universal Health Services, Inc. UHS. Shares have lost about 14.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Universal Health Q2 Earnings & Revenues Lag Estimates
Universal Health Services reported second-quarter 2017 adjusted earnings of $1.94 per share, which missed the Zacks Consensus Estimate by 6.3%. Earnings remained flat year over year.
Net revenue declined 7.4% year over year to $2.61 billion. It also missed the Zacks Consensus Estimate by 0.8%.
Total expenses were $2.3 billion at the end of second quarter, up 9% year over year.
Acute Care Hospitals: Adjusted admissions and adjusted patient days increased 6% and 2.7%, respectively, over the prior-year quarter. Net revenue from acute care services climbed 5.1% in the quarter.
Behavioral hospitals: On a same facility basis, adjusted admissions increased 3.7% while adjusted patient days rose 1.4% on a year-over-year basis. Net revenue decreased 1.4% during the second quarter.
As of Jun 30, 2017, the company had cash and cash equivalents of nearly $66.4 million, up 97% from year-end 2016.
Total assets were $10.5 billion as of Jun 30, 2017, up 2.3% from year-end 2016.
The company managed to lower its debt burden, as evident from the long-term debt of $3.9 billion as of Jun 30, 2017, which declined 1% from year-end 2016.
For the first six months of 2017, net cash provided by operating activities decreased 36% to $534 million over the comparable six-month period of 2016. The downside stemmed from a $217 million unfavorable change in other working capital accounts. This resulted primarily from changes in accrued compensation and accounts payable due to timing of disbursements and a $92 million unfavorable change in cash flows from foreign currency forward exchange contracts related to investments in the U.K.
In Feb 2016, the board of directors authorized a $400 million increase to Universal Health’s stock repurchase program. This raised the aggregate authorization to $800 million from the previous authorization of $400 million in third-quarter 2014.
Concurrently, during the second quarter, the company repurchased 983,900 shares at an aggregate cost of $115.9 million.
During the first six months of 2017, the company repurchased approximately 1.1 million shares at an aggregate cost of approximately $127.1 million
Since the inception of the program on Jun 30, 2017, Universal Health bought back approximately 4.49 million shares at an aggregate cost of approximately $525.3 million.
Based upon the operating trends and financial results experienced during the first six months of 2017, Universal Health has revised the estimated range of adjusted earnings to $7.50 to $8.00 per diluted share from the previously provided range of $7.70 to $8.20 per diluted share.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. While looking back an additional 30 days, we can see even more upward momentum.
Universal Health Services, Inc. Price and Consensus
Universal Health Services, Inc. Price and Consensus | Universal Health Services, Inc. Quote
At this time, the stock has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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