Universal Health Services: A Mixed Bag for Investors Amidst Growth and Challenges
Universal Health Services, Inc. (UHS), with a market cap of $13.1 billion, stands out as a major player in the healthcare sector. Based in King of Prussia, Pennsylvania, the company operates a variety of facilities including acute care hospitals, behavioral health centers, and outpatient services.
Strong Stock Performance Outpaces Market
Over the last year, UHS shares have shown impressive growth. They have increased by 50.2%, outperforming the broader S&P 500 Index ($SPX), which has gained just 32.1% during the same period. In 2024 alone, UHS stock rose 35.2%, while the SPX achieved a 26.1% YTD gain.
Additionally, UHS has surpassed the Health Care Select Sector SPDR Fund’s (XLV) 12.9% increase over the past year and a 7.9% growth YTD.
Mixed Results Following Q3 Revenue Report
On October 24, UHS reported strong Q3 revenue of nearly $4 billion, but shares fell 9.8% the next day. This drop occurred because the adjusted earnings per share (EPS) of $3.71 fell short of analyst expectations. The company faced a 9.2% year-over-year increase in operating costs, which reached $3.6 billion due to rising salaries, benefits, and supply expenses. Investors expressed concerns over the sustainability of profit margins in light of these higher costs.
Looking ahead, analysts predict UHS’ EPS will rise 51.1% year-over-year to $15.93 for the current fiscal year ending in December. Historically, UHS has seen a mixed record on earnings surprises, exceeding estimates in three of the last four quarters but missing in one.
Analyst Opinions and Future Outlook
The consensus among 18 analysts covering UHS is a “Moderate Buy,” supported by 10 “Strong Buy” ratings and eight “Holds.”
Recently, on November 27, TD Cowen analyst Ryan Langston lowered the price target for Universal Health to $251, maintaining a “Buy” rating while highlighting concerns over incoming government policies and potential market shifts.
Currently, UHS trades below the average price target of $246.27. The highest target estimates a price of $285, suggesting a potential upside of 38.7% from its current levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
