Analyzing Universal Health's Q3 Earnings: To Buy or Keep Your Cool?

Universal Health Services, Inc. UHS posted third-quarter 2024 results on Oct. 24, 2024, which were hurt by increased operating expenses due to higher salaries, wages and benefits, other operating expenses, and supplies costs. Nevertheless, the downside was partly offset by revenue growth in the Acute Care Hospital Services and Behavioral Health Care Services segments, attributable to increased patient admissions and adjusted patient days.Now the question arises whether investors should consider buying stake or hold tight to their current investments. Let us answer that question by assessing UHS’ latest quarterly results and long-term growth prospects.UHS’ Q3 Results in DetailUniversal Health reported third-quarter adjusted earnings per share of $3.71, which missed the Zacks Consensus Estimate by 1.1%. Nevertheless, the bottom line climbed 45.5% year over year. Net revenues advanced 11.2% year over year to nearly $4 billion. The top line beat the consensus mark by 1.4%.In the Acute Care Hospital Services unit, adjusted patient days grew 2% year over year. Adjusted patient days in the Behavioral Health Care Services segment increased 1.8% on a same-facility basis. For a detailed analysis, please read our blog on third-quarter earnings: Universal Health Q3 Earnings Miss on Elevated Operating Costs.Impacts of Rising Expenses on UHSDespite some improvements in the recent quarters, a shortage of nurses and other medical personnel remains a nationwide issue, impacting the efficient operation of hospitals amid increasing patient volumes. A shortage in the nursing workforce can hinder a hospital's ability to deliver high-quality care, which may compel it to invest a greater amount in employee recruiting and retention initiatives. Such a situation is expected to sustain the pressure of higher costs on Universal Health’s margins in the days ahead. Total operating costs escalated nearly 8% year over year to $10.5 billion in the first nine months of 2024 due to higher salaries, wages and benefits, other operating expenses, and supplies costs.UHS’ Long-term Growth ProspectsThe top line of Universal Health continues to be driven by increased patient volumes and higher patient days. In the first nine months of 2024, adjusted admissions in its acute care hospitals rose 3.1% year over year on a same-facility basis, while the same in UHS’ behavioral health facilities inched up 0.3%. The resumption of elective procedures, previously delayed due to the pandemic, is poised to enhance patient volumes and occupancy rates, thus significantly contributing to revenue growth for healthcare facility operators. This resurgence is expected to positively impact Universal Health, as well as its other industry peers such as HCA Healthcare, Inc. HCA and Tenet Healthcare Corporation THC. Universal Health's network of inpatient behavioral healthcare facilities is well-positioned to address the ongoing mental health needs of the American population. As of Sept. 30, 2024, the company maintained a comprehensive treatment network of 27 inpatient acute care hospitals, 334 inpatient behavioral health facilities and 49 outpatient facilities spread across 39 states, Washington DC, the U.K. and Puerto Rico. The company is committed to expanding and enhancing its services, recruiting top-tier physicians and maintaining rigorous financial and operational oversight, all of which contribute to improved service quality and, ultimately, increased profitability.UHS Stock’s Price PerformanceUniversal Health’s shares have gained 34.6% year to date compared with the industry’s 30.4% growth. In comparison with UHS, THC has soared 106.6% in the same time frame and HCA has rallied 31.9%. Meanwhile, the S&P 500 Index has risen 20.5% in the said time frame.Year-to-Date Price Performance Image Source: Zacks Investment Research Mixed Analyst Sentiment for Universal HealthIn the past 30 days, the company's 2024 earnings estimates have witnessed downward revisions, while 2025 earnings estimates have witnessed upward revisions. Image Source: Zacks Investment Research UHS’ ValuationThe company is cheaply priced compared with the industry average. Currently, UHS is trading at 11.8X forward 12-months earnings, below the industry’s average of 14.15X. Image Source: Zacks Investment Research ConclusionUniversal Health’s third-quarter results highlight both its strengths and obstacles for investors to consider. While the company’s earnings missed estimates, growing patient volumes and an extensive treatment network may provide some respite to investors. UHS’ relatively lower valuation than the industry further enhances the attractiveness of the stock. But a mixed sentiment for estimate revisions reflects the skepticism surrounding the stock. For long-term investors, Universal Health’s strong fundamentals may justify holding the stock, but investors looking to add the stock to their portfolios may want to wait for a more better entry point. UHS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Universal Health Services, Inc. (UHS): Free Stock Analysis Report Tenet Healthcare Corporation (THC): Free Stock Analysis Report HCA Healthcare, Inc. (HCA): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks