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Universal Health (UHS) Gains 28% in a Year: What Lies Ahead?

Shares of Universal Health Services, Inc. UHS have gained 27.8% in the past year compared with the industry’s 19.2% growth. The Medical sector and the S&P 500 composite index have gained 3.8% and 24.7%, respectively, in the same time frame. With a market capitalization of $12.8 billion, the average volume of shares traded in the last three months was 0.7 million.

Universal Health thrives on rising patient volumes and the resumption of elective procedures, fueling revenue growth. New services, strategic acquisitions and strong cash flows remain added tailwinds.

The leading U.S. healthcare services provider with a Zacks Rank #3 (Hold) boasts an impressive track record of beating estimates in each of the trailing four quarters, the average surprise being 8.12%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Can UHS Retain the Momentum?

The Zacks Consensus Estimate for Universal Health’s 2024 earnings is pegged at $13.76 per share, indicating a 30.6% increase from the year-ago reported figure. The consensus mark for revenues is $15.5 billion, which implies 8.5% growth from the year-ago number.

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The Zacks Consensus Estimate for 2025 earnings is pegged at $15.00 per share, which implies a 9% improvement from the 2024 estimate. The consensus mark for revenues is $16.3 billion, indicating 5% growth from the 2024 estimate.

Universal Health continues to experience growth in its Acute Care Hospital Services and Behavioral Health Care Services segments on the back of increasing patient volumes and higher patient days. This growth is significantly contributing to the company's overall revenues. Management projects net revenues for 2024 to be between $15.411 billion and $15.706 billion, which indicates a 7.9-10% increase from the 2023 reported figure.

The ongoing prevalence of mental health issues among Americans is expected to maintain the strong demand for UHS’ behavioral health hospitals. Additionally, the resumption of elective procedures, previously postponed due to the COVID pandemic, is likely to generate higher revenues for Universal Health’s surgery centers.

To enhance operating revenues and profitability, Universal Health launches new services, upgrades existing ones, recruits skilled physicians and applies stringent financial and operational controls to its owned hospitals.

The healthcare services provider follows a strategy of acquiring, constructing or leasing hospital facilities. This approach allows UHS to enter new markets, improve healthcare delivery capabilities and expand its treatment network. The company even considers the divestiture of underperforming facilities.  Proceeds received from sales of assets and businesses amounted to $5.4 million in the first quarter.

As of Mar 31, 2024, Universal Health's healthcare portfolio included 360 inpatient facilities and 47 outpatient and other facilities across 39 states, Washington, D.C., the UK and Puerto Rico.

A solid financial position is crucial for pursuing business investments, and the company’s sound cash balance and strong cash-generating capabilities underscore its financial health. UHS generated operating cash flows of $396.4 million in the first quarter, marking a 36.3% year-over-year improvement. The company also returns capital to shareholders through share repurchases and dividend payments.

UHS boasts an impressive VGM Score of A. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.

Stocks to Consider

Some better-ranked stocks in the Medical space are Tenet Healthcare Corporation THC, Edwards Lifesciences Corporation EW and Elevance Health, Inc. ELV. While Tenet Healthcare currently sports a Zacks Rank #1 (Strong Buy), Edwards Lifesciences and Elevance Health carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tenet Healthcare’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 56.50%. The Zacks Consensus Estimate for THC's 2024 earnings implies a rise of 25.2% from the year-ago figure.

The consensus estimate for THC’s earnings has moved 4% north in the past 30 days. Shares of Tenet Healthcare have gained 75.4% in the past year.

The bottom line of Edwards Lifesciences outpaced the Zacks Consensus Estimate in two of the trailing four quarters and matched the mark twice, the average surprise being 1.17%. The Zacks Consensus Estimate for EW’s 2024 earnings implies a rise of 10.4% from the year-ago figure. The consensus mark for revenues indicates growth of 9.3% from the year-ago reported figure.

The consensus estimate for EW’s earnings has moved 0.4% north in the past 60 days. Shares of Edwards Lifesciences have declined 3.7% in the past year.

Elevance Health’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 2.77%. The consensus estimate for ELV’s 2024 earnings indicates a rise of 12.4% from the year-ago figure. The consensus mark for revenues implies an improvement of 1.1% from the year-ago reported figure.

The consensus estimate for ELV’s earnings has moved 0.1% north in the past 60 days. Shares of Elevance Health have gained 20.4% in the past year.

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Universal Health Services, Inc. (UHS) : Free Stock Analysis Report

Edwards Lifesciences Corporation (EW) : Free Stock Analysis Report

Tenet Healthcare Corporation (THC) : Free Stock Analysis Report

Elevance Health, Inc. (ELV) : Free Stock Analysis Report

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