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Universal Health (UHS) Tops Q1 Earnings on Strong Sales

Universal Health Services Inc. UHS reported first-quarter 2016 adjusted earnings of $1.98 per share, which beat the Zacks Consensus Estimate by 12 cents. Meanwhile, earnings surged 11.2% on a year-over-year basis.
 

 

The upside was driven by almost a 10.1% increase in revenues to almost $2.45 billion which also surpassed the Zacks Consensus Estimate of $2.39 billion.

Quarter Details

Same facility revenues from acute care hospitals increased 12% year over year in the quarter. Adjusted admissions climbed 7.8% while adjusted patient days increased 3.5%. Net revenue per adjusted admission inched up 3% while net revenue per adjusted patient day was up 7.3%.

Same facility revenues from behavioral hospitals improved 3.5% in the quarter. Adjusted admissions increased 1.4% while adjusted patient days increased 1%. Net revenue per adjusted admission inched up 1.8% while net revenue per adjusted patient day was up 2.2%.

Universal Health noted that it continues to face shortage of psychiatrist, nursing and other clinicians in some of its markets in the quarter.

During the first quarter, Universal Health opened a total of 182 new behavioral health beds. A total 57 of these beds were opened at a new de novo hospital located in Oklahoma and 125 beds were opened at some of the company’s busiest facilities.

Earnings before, lease and rental expense, depreciation and amortization, interest expense, and income taxes ("EBITDAR") contracted 40 basis points (bps) to 19.8%.

Salaries, wages & benefits as percentage of revenues increased 50 bps on a year-over-year basis to 46.9% in the quarter.

On a same facility basis, operating margin at acute care hospitals increased 60 bps to 21.1%. Operating margin at behavioral health care facilities contracted 60 bps to 27.8%.

Consolidated operating margin contracted 20 bps to 14.5% in the reported quarter.

Share Buyback program

In February, Universal Health announced a new share repurchase program worth $400 million, which increased total authorization to $800 million. During the first quarter of 2016, the company repurchased 1.3 million shares at an aggregate cost of $152.4 million.

Zacks Rank & Key Picks

Universal Health carries a Zacks Rank #2 (Buy).

Better-ranked stocks in the broader medical sector include BioTelemetry BEAT, Baxter International BAX and Edwards Lifesciences EW. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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