Universal Health Services, Inc. (UHS) owns and operates acute care hospitals and outpatient and behavioral health care facilities. The company operates through the Acute Care Hospital Services and Behavioral Health Care Services segments. UHS’ solid financial results in the last reported quarter exceeded analysts’ expectations.

The company’s revenue came in at $3.91 billion, surpassing analysts’ estimate of $3.87 billion. Also, its consensus EPS estimate of $4.31 beat the street expectations of $3.32. Further, for the upcoming quarter, analysts expect the company’s EPS and revenue for the period (ending September 2024) to increase 45.4% and 9.7% year-over-year to $3.71 and $3.91 billion, respectively.

Moreover, UHS has an impressive earnings surprise history, having topped the consensus revenue and EPS estimates in all of the trailing four quarters.

Further, buoyed by its performance, UHS revised its annual outlook, raising the forecast for net revenues to $15.56 billion – $15.75 billion from the prior range of $15.41 billion – $15.71 billion. Also, it now expects adjusted EBITDA, net of NCI between $2.15 billion and $2.23 billion, up from the prior forecast. And its adjusted EPS is set to range from $15.40 to $16.20.

Shares of UHS have surged 32.3% over the past six months and 84.4% over the past year to close its last trading session at $238.02.

Let’s look at factors that could influence UHS’ performance in the upcoming months.

Robust Financials

UHS’ net revenue increased 10.1% year-over-year to $3.91 billion during the second quarter that ended June 30, 2024. Its income from operations grew 55.8% from the year-ago value to $436.40 million. Adjusted net income attributable to UHS came in at $292.56 million and $4.31 per share, indicating 63.1% and 70.3% growth from the prior year’s quarter, respectively.

In addition, the company’s adjusted EBITDA net of NCI was $578.70 million, up 35.9% from the prior year’s quarter.

Also, UHS’ total assets amounted to $14.07 billion as of June 30, 2024, compared to $13.97 billion as of December 31, 2023. A strengthened asset base may positively impact the company’s financial health and ability to pursue future growth opportunities.

Solid Historical Growth

UHS’ revenue and EBITDA have grown at respective CAGRs of 6.3% and 3.1% over the past five years. The company’s EBIT has increased 2.8% over the same timeframe, while its net income and EPS have improved at CAGRs of 3.1% and 9.3%, respectively.

Also, the company’s tangible book value and total assets have grown at CAGRs of 10.4% and 3.7% over the past five years, respectively.

Favorable Analyst Estimates

Analysts expect UHS’ revenue for the third quarter (ending September 2024) to increase 9.7% year-over-year to $3.91 billion. The consensus EPS estimate of $3.71 for the same quarter reflects a 45.4% year-over-year improvement. Furthermore, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters, which is impressive.

For the fiscal year ending December 2024, UHS’ revenue and EPS are expected to grow 9.9% and 51.4% year-over-year to $15.69 billion and $15.96, respectively. Additionally, Street expects the company’s revenue and EPS for the fiscal year 2025 to increase 5.7% and 11.8% year-over-year to $16.59 billion and $17.85, respectively.

High Profitability

UHS’ trailing-12-month EBIT margin of 9.60% is 246.9% higher than the respective industry average of 2.77%. Its trailing-12-month levered FCF margin of 4.05% is considerably higher than the industry average of 1.58%.

Furthermore, the stock’s trailing-12-month EBITDA margin of 13.40% favorably compares to the industry average of 6.58%. Similarly, its trailing-12-month CAPEX/Sales of 5.70% is 71.5% higher than the industry average of 3.32%.

Low Valuation

In terms of forward non-GAAP P/E, UHS is currently trading at 14.91x, 31.9% lower than the industry average of 21.89x. Also, the stock’s forward EV/Sales and EV/EBITDA of 1.33x and 9.52x are considerably lower than the industry average of 3.70x and 13.92x, respectively.

Additionally, the stock’s forward Price/Sales and Price/Cash Flow of 1.01x and 8.67x are 73.8% and 46.3% lower than the industry averages of 3.86x and 16.16x, respectively.

POWR Ratings Reflect Promise

UHS’ solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. UHS has a B grade for Sentiment, consistent with its optimistic analyst estimates. The stock has a B grade for Value, justified by its lower-than-industry valuation.

Further, it also has a B grade for Growth, which is in sync with its robust financial performance in the last reported quarter.

UHS is ranked #2 in the 10-stock A-rated Medical – Hospitals industry.

Beyond what I have stated above, we have also given UHS grades for Quality, Momentum, and Stability. Get access to all the UHS Ratings here.

Bottom Line

UHS is among the largest and most respected providers of hospital and healthcare services, offering a wide variety of services to patients. Analysts appear bullish about the company’s growth prospects, driven by the company’s strong market position, wide services range, strong financial performance, and robust profitability.

Further, the industry’s inelastic demand offers vast opportunities for the company’s future growth.

Given UHS’ solid financials, accelerating profitability, and promising growth outlook, this stock could be an ideal buy now.

How Does Universal Health Services, Inc. (UHS) Stack Up Against Its Peers?

While UHS has an overall POWR Rating of A, investors could also check out these other stocks within the A-rated Medical – Hospitals industry with A (Strong Buy) or B (Buy) ratings: Fresenius SE & Co. KGaA ADR (FSNUY), Tenet Healthcare Corporation (THC), and Encompass Health Corporation (EHC).

For exploring more A and B-rated medical stocks, click here.

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UHS shares were trading at $240.52 per share on Monday afternoon, up $2.50 (+1.05%). Year-to-date, UHS has gained 58.28%, versus a 20.61% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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