IIt’s been about a month since the last earnings report from Universal Health Services (UHS). Stocks lost about 3.1% during this period, outperforming the S&P 500.
Will the recent negative trend continue until its next earnings release, or is Universal Health Services set for a breakout? Before we dive into the reaction of investors and analysts lately, let’s take a look at its latest earnings report to better understand the important factors.
Universal Health Q1 Earnings Miss Mark, Tumble Y/Y
Universal Health reported adjusted earnings of $2.15 per share in the first quarter of 2022, which missed Zacks’ consensus estimate of $2.47 by 13%. Net income decreased 11.9% year-on-year.
Results were impacted by escalating expenses and declining admissions in its behavioral healthcare services segment. However, the same was partly offset by better earnings.
Quarterly operational update
Net revenue of $3.29 billion increased 9.3% year over year. The top line beat the consensus mark of 2.2%.
Total operating costs increased 12.6% year-over-year to $3 billion in the first quarter, primarily due to higher salaries, wages and benefits, other expense operations, supplies, depreciation and amortization.
Acute care hospital services
On a same-site basis, adjusted patient days increased 5.5% year-over-year in the first quarter. Net revenue increased 9.7% year-over-year in the quarter on a same-store basis from UHS Acute Care Services.
Behavioral Health Care Services
In the quarter under review, adjusted patient days at the same facility decreased by 1.3% year over year. Universal Health’s behavioral healthcare services net revenue increased 3.8% year-over-year.
Financial Update (as of March 31, 2022)
Universal Health ended the first quarter with cash and cash equivalents of $105.9 million, down 8.1% from the end-2021 level.
UHS had aggregate available borrowing capacity of $736 million under its $1.2 billion revolving credit facility, net of outstanding borrowings and letters of credit at the end of the first quarter of 2022 .
Total assets of $13.1 billion increased 0.4% from the figure as of December 31, 2021.
UHS’ long-term debt was $4.25 billion, which was up 2.6% from end-2021 levels.
In the three months of 2022, free cash provided by operating activities of $445 million compares favorably to the $72 million recorded in the comparable period of the prior year.
This is mainly explained by a favorable variation resulting from accelerated Medicare payments received in 2020 and reimbursed in the first quarter of 2021, an unfavorable variation in accounts receivable, an unfavorable variation due to lower net income and amortization expenses, inventory – compensation expense and gains/losses on sales of assets and businesses and other adverse net changes combined.
Share buyback update
In the first quarter, Universal Health repurchased 2.65 million shares worth $350.2 million.
In February, management increased its share buyback plan by $1.4 billion. As of March 31, 2021, UHS had an aggregate stock buyback plan of $1.41 billion
Universal Health reaffirmed its previously released 2022 operating earnings guidance.
How have the estimates changed since then?
It turns out that the estimate revision has trended lower over the past month.
The consensus estimate changed by -10.53% due to these changes.
Currently, Universal Health Services has an excellent growth score of A, although it lags far behind on the Momentum score front with an F. However, the stock has been given an A rating on the value, placing it in the top quintile for this investment strategy.
Overall, the title has an overall VGM score of A. If you’re not focused on a strategy, this score is the one you should be interested in.
Estimates have trended lower overall for the stock, and the magnitude of these revisions indicate downward movement. It’s no surprise that Universal Health Services has a Zacks rank of #4 (selling). We expect the stock to perform below average over the next few months.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.