Why Is Universal Health Services (UHS) Down 7.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Universal Health Services (UHS). Shares have lost about 7.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Universal Health Services 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 Q4 Earnings Beat on Solid Segments
Universal Health reported fourth-quarter 2022 adjusted earnings per share (EPS) of $3.02, which surpassed the Zacks Consensus Estimate by 2%. Additionally, the bottom line grew 2.4% year over year.
The quarterly results of UHS were aided by improved patient volumes at its acute care and behavioral health care facilities. However, the upside was partly offset by an elevated expense level related to salaries, wages and benefits, which might have cropped up from the shortage of nurses and other medical personnel throughout the United States.
Quarterly Operational Update
Net revenues of Universal Health advanced 5.2% year over year to $3,447 million in the quarter under review. The top line beat the consensus mark by 1.3%.
Adjusted earnings before interest, taxes, depreciation & amortization (EBITDA), net of net income attributable to noncontrolling interests (NCI), amounted to $471.7 million. The metric does not consider the impact of the provision for asset impairment and other (income) expense, net. The figure improved 4.3% year over year.
Total operating costs escalated 7.6% year over year to $3,185.6 million in the fourth quarter mainly due to increased salaries, wages and benefits, other operating expenses, and depreciation and amortization.
Segmental Update
Acute Care Hospital Services
Adjusted admissions (adjusted for outpatient activity) grew 5.5% year over year on a same-facility basis in the quarter under review, while adjusted patient days inched up 1.6% year over year. Net revenues derived from Universal Health’s acute care services witnessed a 2.6% year-over-year uptick on a same-facility basis.'
Behavioral Health Care Services
In the fourth quarter, adjusted admissions inched up 0.7% year over year on a same-facility basis. Adjusted patient days advanced 2% year over year. Net revenues stemming from behavioral health care services of UHS rose 4.3% year over year.
Financial Update (as of Dec 31, 2022)
Universal Health exited the fourth quarter with cash and cash equivalents of $102.8 million, which declined 10.8% from the figure in 2021 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 $886 million at the fourth-quarter end.
Total assets of $13,494.2 million increased 3.1% from the 2021-end level.
Long-term debt amounted to $4,726.5 million, up 14.1% from the figure as of Dec 31, 2021. Short-term debt was at $81.4 million.
Total equity of $5,965.4 million fell 3.7% from the figure in 2021 end.
During 2022, net cash provided by operating activities climbed 12.7% from the 2021-end level to $996 million. The growth came on the back of a favorable change from the early return of Medicare-accelerated payments received in 2020 and repaid in first-quarter 2021.
Share Repurchase Update
Universal Health bought back shares worth roughly $107.2 million in the fourth quarter. It had leftover funds of around $947 million under its repurchase authorization as of Dec 31, 2022.
2023 Guidance
Management estimates net revenues between $14,044 million and $14,314 million, which indicates an improvement of around 4.8%-6.8% from the 2022 figure of $13,399.4 million.
Adjusted EBITDA, net of NCI, is anticipated within $1,662-$1,753 million, the midpoint of which suggests a 2.7% growth from the 2022 figure of $1,662 million.
UHS projects adjusted EPS in the range of $9.50-$10.50 for 2023, the mid-point of which implies 1.2% growth from the 2022 figure of $9.88.
Depreciation and amortization is estimated at $594.4 million. Interest expenses are projected at around $198 million. Capital expenditures are expected within $725-$875 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -16.42% due to these changes.
VGM Scores
Currently, Universal Health Services has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Universal Health Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Universal Health Services, Inc. (UHS) : Free Stock Analysis Report
