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Select Medical (SEM) Q4 Earnings Top Estimates, Keeps View

Zacks Equity Research
Updated

Select Medical Holdings Corp. SEM reported fourth-quarter 2017 earnings of 31 cents per share, which surpassed the Zacks Consensus Estimate by 63.16%. Also, the bottom line more than doubled year over year.

Select Medical Holdings Corporation Price, Consensus and EPS Surprise

Select Medical Holdings Corporation Price, Consensus and EPS Surprise | Select Medical Holdings Corporation Quote

 

The company’s fourth-quarter results benefited from a solid performance across all its segments. Both revenues and margins expanded.

Operational Update

Operating revenues of Select Medical grossed $1.11 billion during the quarter, up 6.6% year over year. Higher Outpatient Rehabilitation revenues plus Specialty and Concentra revenues led to this upside. Moreover, the top line surpassed the Zacks Consensus Estimate by 1.35%.

Total operating expenses amounted to $1.04 billion, up 4.8% year over year. Increase of 4% in cost of services, 7.9% higher depreciation and amortization expenses, 9.3% rise in general and administrative expenses and a 16.4% increase in bad debt expenses induced this overall escalation in expenses.

Income from operations improved 37% year over year to $76.4 million on the back of higher revenues.

Adjusted EBITDA rose 27.6% year over year to $124.6 million.

Full-Year Highlights

Earnings of 97 cents per share surged 59% over the tally in 2016.  

Operating revenues of Select Medical logged $4.4 billion during the reported quarter, up 3.7% year over year

Segment Update

Long Term Acute Care segment operating revenues rose 2.1% year over year to $431.9 million.

Adjusted EBITDA was $58.4 million, having increased 28.9% year over year with margins expanding 240 basis points (bps) to 13.5%.

Inpatient Rehabilitation segment operating revenues grew 24.7% year over year to $171.1 million.

Adjusted EBITDA was $28 million, soaring 65.1% year over year with margins having improved 400 basis points (bps) to 16.4%.

Operating revenues from Outpatient Rehabilitation rose 2.7% year over year to $256.4 million.

Adjusted EBITDA was $30 million, having slid 2.6% year over year with margins contracting 60 basis points (bps) to 11.7%.

Concentra segment reported net operating revenues of $255 million, up 7.9% from the prior-year quarter. Adjusted EBITDA increased 28% year over year to $31.9 million.

Adjusted EBITDA margin expanded 200 bps to 12.5%.

Financial Update

Select Medical exited 2017 with cash of $122.5 million, up from $99 million at year-end 2016.

As of Dec 31, 2017, long-term debt, net of current portion, slipped 0.3% to $2.7 billion from the figure recorded at 2016-end.

Cash flow from operations was $238.1 million in 2017, down from $346.6 million in 2016.

2018 Guidance

Select Medical expects earnings per share between 97 cents and $1.12 on revenues of $5-$5.2 billion. Net income is anticipated between 69 cents and 87 cents.

Adjusted EBITDA is projected between $630 million and $660 million.

Zacks Rank

Select Medical carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Performance of Other Health Maintenance Organization Stocks

Among other stocks from the health maintenance organization industry having reported fourth-quarter earnings, the bottom line of Humana Inc. HUM, Aetna Inc. AET and UnitedHealth Group Incorporated UNH topped the respective Zacks Consensus Estimate.

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Aetna Inc. (AET) : Free Stock Analysis Report
 
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