Universal Health stock falls amid Raymond James seeing Q4 as lackluster; EPS outlook below estimates

Universal Health Services (NYSE:UHS) stock fell ~10% on Tuesday after the company's FY23 adjusted EPS outlook was seen below estimates.

However it should be noted that Tuesday is also the ex-dividend date.

Stephens reiterated its Equal Weight rating on UHS with a price target of $155.

Meanwhile, Raymond James Analyst John Ransom described Q4 as lackluster, according to a Bloomberg note. The firm has a Market Perform rating on UHS.

The SA Quant Rating and the average Wall Street Analysts' Rating, both, have a Hold rating on UHS.

Raymond James analyst noted that Acute segment adjusted EBITDA fell -28.3% to $156M (firm's estimate $226M), or $214M after adjusting for the $57.6M writedown on a Las Vegas hospital, as margins contracted to 8% (Raymond estimate 11.8%), compared to 11.8% last year.

The company said in its earnings release that its financial results, included a pre-tax provision for asset impairment of $57.6M, to write-down the asset value of Desert Springs Hospital Medical Center.

Universal noted that in early 2023 it announced plans to discontinue all inpatient operations at the 282-bed acute care hospital in Las Vegas by March of 2023.

The decision was made due to competitive pressures and operational challenges experienced in the market, which had a significant unfavorable impact on the hospital's results of operations during the past year, and physical plant constraints due to the age of the facility (which opened in 1971), according to the company.

Universal added that it plans to continue providing emergency department services within a portion of the existing facility while its builds a new free-standing emergency department on the hospital's campus.

The provision for asset impairment reduced the asset values of the facility's real estate and equipment to their estimated fair values, the company noted.

Q4 adjusted EPS grew +2.3% to $3.02. Meanwhile, net revenues increased +5.2% Y/Y to $3.45B. Both top and bottom line beat analysts estimates.

For full year 2022, net revenues grew +6% Y/Y to $12.64B.

The company said that during Q4, at its acute care hospitals owned during both periods (same facility basis), adjusted admissions (adjusted for outpatient activity) increased by 5.5% while adjusted patient days increased by 1.6%, Y/Y/.

At these facilities, during Q4 2022, net revenue per adjusted admission declined by 3.8% while net revenue per adjusted patient day fell 0.2% Y/Y, according to the company.

In Q4 2022, At the company's behavioral health care facilities on a same facility basis, adjusted admissions grew by 0.7% while adjusted patient days increased by 2% Y/Y.

Universal noted that at these facilities, net revenue per adjusted admission climbed 3.4% and net revenue per adjusted patient day grew 2.2% Y/Y.

Buyback: The company said that as of Dec. 31, 2022, it had an available repurchase authorization of about $947M. In Q4 2022, the company bought back ~812.14K shares for about $107.2M.

Outlook:

The company expects full year 2023 net revenues to be between $14.04B and $14.31B (consensus $14.07B).

Universal anticipates adjusted EPS in the range of $9.50 to $10.50 (consensus $10.54).