Universal Health (UHS) Q2 Earnings In-Line, Revenues Beat

Universal Health Services Inc. (NYSE:UHS) reported second-quarter 2016 adjusted earnings of $1.94 per share, in-line with the Zacks Consensus Estimate. Meanwhile, earnings improved 4.9% on a year-over-year basis.

The upside was driven by a 6.8% increase in revenues to around $2.43 billion, which was well-ahead of the Zacks Consensus Estimate of $2.27 billion.

Quarter Details

Same facility revenues from acute care hospitals increased 7.4% year over year in the quarter. Adjusted admissions climbed 3.9% while adjusted patient days increased 2.8% from the same quarter last year.

Net revenue per adjusted admission inched up 1.3%, while net revenue per adjusted patient day was up 2.4%.

Meanwhile, same facility revenues from behavioral hospitals improved 2% in the quarter. Adjusted admissions decreased 0.3% while adjusted patient days increased 0.2% compared to the second quarter of 2015.

Net revenue per adjusted admission inched up 2.4%, while net revenue per adjusted patient day was up 1.9% in the quarter.

Margin Details

Earnings before, lease and rental expense, depreciation and amortization, interest expense, and income taxes ("EBITDAR") contracted 110 basis points (bps) to 18.9%.

Both salaries, wages & benefits and other operating expenses, as a percentage of revenues, increased 60 bps on a year-over-year basis to 46.5% and 24.1%, respectively.

However, supplies expense as a percentage of revenues declined 10 bps to 10.5%. Lease and rental expense as a percentage of revenues remained flat at 1%.

As a result, EBITDA margin contracted 70 bps from the year-ago quarter to 17.5%.

On a same facility basis, operating margin at acute care hospitals decreased 140 bps to 19.1%. Operating margin at behavioral health care facilities contracted 60 bps to 28.1%.

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

Buyback Program

In Feb 2016, Universal Health announced a new share repurchase program worth $400 million, which raised the total authorization to $800 million. During second quarter of 2016, the company repurchased 235,352 shares at an aggregate cost of $29.1 million.

Zacks Rank & Key Picks

Universal Health carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader medical sector include MEDNAX Inc (NYSE:MD) , Abiomed Inc (NASDAQ:ABMD) and AMN Healthcare Services (NYSE:AHS) . Notably, Abiomed and AMN Healthcare services sport a Zacks Rank #1 (Strong Buy), Mednax holds a Zacks Rank #2 (Buy).