Universal Health Services, one of the leading providers of hospital and healthcare services in the United States, recently released its financial results for the third quarter of 2024. These results show a solid performance, marked by a significant increase in revenues and profits compared to the previous year. Nevertheless, the market is taking a rather negative view of these results.
For the third quarter of 2024, UHS reported attributable net income of $258.7 million, or $3.80 per diluted share. This represents a significant increase on the $167.0 million, or $2.40 per diluted share, recorded in the third quarter of 2023. Net revenues rose by 11.2% to $3.963 billion, compared with $3.563 billion the previous year.
The company also reported adjusted net earnings of $252.5 million, or $3.71 per diluted share, up from $177.5 million, or $2.55 per diluted share, in the third quarter of 2023. These adjusted results exclude certain non-recurring items, such as unrealized gains or losses on the market value of certain equity securities.
Performance by business segment
- Acute Care Services
UHS acute care services enjoyed stable growth. Adjusted admissions rose by 1.5%, and adjusted patient days were up 2.0% on the third quarter of the previous year. Adjusted net income per admission rose by 7.0%, while adjusted net income per patient day grew by 6.5%. Overall, revenues from acute care services rose by 9.2% on a same-institution basis.
- Behavioral health services
Behavioral health services also performed strongly, with a 2.2% increase in adjusted admissions and a 1.8% increase in adjusted patient days. Adjusted net income per admission rose by 8.0%, and adjusted net income per patient day increased by 8.5%. Revenues from behavioral health services thus increased by 10.5% on a same-institution basis.
Balance sheet and liquidity
UHS strengthened its liquidity position thanks to several important financial transactions in September 2024. Debt is 2.21 times EBITDA and 2.5 times operating cash flow. The company issued covered bonds for a total of $1 billion, with maturities in 2029 and 2034. In addition, it amended its credit agreement to extend the maturity date and increase its revolving credit facility to $1.3 billion. At September 30, 2024, UHS had available borrowing capacity of $1.01 billion. This will enable it to meet compensation payments following the recent news about damages after the Virginia jury sided with the plaintiffs in an abuse case.
Share buyback program
The UHS Board of Directors authorized a $1 billion increase in its share buyback program in July 2024. During the third quarter, the company repurchased 658,000 shares at a total cost of approximately $153.9 million. Since the beginning of the year, UHS has repurchased 1.731 million shares at a total cost of $348.9 million. As of September 30, 2024, the remaining repurchase authorization amounted to approximately $1.074 billion.
Outlook and challenges
For the remainder of 2024, UHS plans to continue capitalizing on its growth strategy, which includes the acquisition and development of high-quality hospitals in rapidly expanding markets. However, the company remains vigilant to potential challenges, such as regulatory changes in the Medicare and Medicaid programs, as well as the impact of high interest rates on its borrowing costs.
Universal Health Services demonstrated strong financial performance in the third quarter of 2024, underpinned by robust growth in its acute care and behavioral health segments. With prudent liquidity management and an active share buyback program, the company is well positioned to continue its growth trajectory while navigating a complex and somewhat deteriorated economic and regulatory environment. Shares are expected to be lower at market open. UHS has been part of the Momentum Picks quarterly selection since 03/31/2024.
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