Universal Health Realty Reports Strong Earnings Growth for Q4 2024
Shares of Universal Health Realty Income Trust (UHT) have increased by 0.9% since the company released its earnings for the quarter ending December 31, 2024. In comparison, the S&P 500 Index experienced a decline of 1.7% during the same period. Over the past month, UHT’s stock rose by 3.9%, while the S&P 500 saw a 3.4% drop.
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Earnings Summary
In the fourth quarter of 2024, Universal Health Realty reported net income of $4.7 million, or $0.34 per diluted share, marking a 29.7% increase from $3.6 million, or $0.26 per diluted share, in the same quarter last year. Adjusted net income, excluding a prior-year loss on divestiture, rose by $836,000, or $0.06 per diluted share. This growth was driven by a $1.2 million increase in income from various properties, despite a $337,000 increase in interest expenses.
For the year 2024, net income increased by 24.9% to $19.2 million, or $1.39 per diluted share, up from $15.4 million, or $1.11 per diluted share, in 2023. Adjusted net income also improved, increasing by $3.6 million, equivalent to $0.26 per diluted share, due to a $3.5 million net income gain from properties and a $2 million drop in expenses tied to a Chicago, IL property. These gains were partially countered by a $1.9 million rise in interest expenses.
Key for real estate investment trusts, funds from operations (FFO) rose by 3.3% to $11.8 million, or $0.85 per diluted share, in Q4 2024. This compares to FFO of $11.4 million, or $0.82 per diluted share, during the same quarter the previous year. Over the full year, FFO improved by 7.4% to $47.9 million, or $3.46 per diluted share, up from $44.6 million, or $3.23 per diluted share, in 2023.
Universal Health Realty Income Trust Price, Consensus, and EPS Surprise
Universal Health Realty Income Trust price-consensus-eps-surprise-chart | Universal Health Realty Income Trust Quote
Revenue and Operational Highlights
Lease revenue from Universal Health Services (UHS) facilities remained stable at $8.3 million in Q4 2024, matching the prior-year figure. However, lease revenue from non-related parties grew by 3.1% to $14.5 million from $14 million.
In 2024, lease revenue from UHS facilities increased by 3.1% to $33.6 million, up from $32.6 million in the previous year. Similarly, revenue from non-related parties rose by 4.8% to $57.7 million from $54.9 million.
Interest income from financing leases associated with UHS facilities was $1.355 million for the quarter, down slightly by 0.5% from $1.362 million a year prior. For the full year, this figure was $5.4 million, also down by 0.5% from $5.5 million in 2023.
Operating expenses amounted to $15.4 million in Q4 2024, reflecting a 4.8% decrease from $16.2 million in the same quarter of 2023, aided by a reduction in depreciation and amortization. For the year, total operating expenses were $62.2 million, down 3.1% from $64.2 million in 2023.
Management Insights
Management credited the earnings growth to increased income from various properties and reduced property-related expenses, particularly in Chicago, where previously high demolition costs affected results.
To bolster liquidity, UHT amended its credit agreement in September 2024. This adjustment raised its borrowing capacity to $425 million (up from $375 million) and extended the maturity date to September 30, 2028. By year-end, the company reported $348.9 million in outstanding borrowings and $76.1 million in available borrowing capacity.
Earnings Influencers
Earnings growth was primarily driven by increased income across multiple properties. However, it faced headwinds from rising interest expenses due to higher average borrowing rates and an increase in outstanding debt from the revolving credit agreement.
To address interest rate risks, Universal Health Realty engaged in a new interest rate swap agreement in October 2024, securing a 3.2725% fixed rate on $85 million of debt through September 2028. This swap replaces two expired agreements that had a lower combined rate of 1.21%.
Future Outlook
Management did not offer specific financial guidance for 2025 but highlighted that macroeconomic conditions, particularly interest rates and property-related expenses, will continue to impact future performance.
Recent Developments
In March 2023, the company completed the construction of Sierra Medical Plaza I in Reno, NV. This property is currently 68% leased and includes a 10-year master flex lease covering 34% of the rentable space.
Furthermore, Universal Health Realty sold a vacant specialty facility in Corpus Christi, TX, in December 2023 for $3.9 million, resulting in a $232,000 loss on divestiture. The company is actively marketing vacant properties in Chicago, IL, and Evansville, IN.
This article originally published on Zacks Investment Research (zacks.com).
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