Universal Health Services, Inc. – Aggressive Growth – Zacks Rank Buy
Source: http://www.zacks.com/commentary/12803/Universal+Health+Services%2C+Inc.+-+Aggressive+Growth+-+Zacks+Rank+BuyPosted on Friday, November 20th, 2009 | In Investing Lessons, Stocks to Watch
Universal Health Services, Inc (UHS) remains a good value as the Zacks Consensus Estimate continues to climb.
Company Description
Universal Health Services owns and operates facilities for acute care, behavioral care, radiation oncology, and others. The centers provide a variety of services including general surgery, obstetrics, ER care, pediatric care and many others.
EPS Up 41%
Universal reported third-quarter results on Oct 29 that included net income of $51.1 million, up from $37.0 million in the same period last year. This equates to earnings per share of $1.03, compared to 73 cents one year ago.
A 4% increase in revenues to $1.3 billion drove the strong results. Management commented on a strong performance in the behavioral segment that offset the uncompensated care in the acute area, which is up due to economic troubles.
The Trend Continues
Last quarter was the fourth consecutive earnings surprise, as EPS came in at $1.03 compared to the Zacks Consensus Estimate of just 87 cents. Over the last 4 quarters, Universal has topped estimates by an average of 18%.
Analysts React
Since the earnings release 14 of 16 analysts have raised full-year estimates. The Zacks Consensus Estimate is now $4.80, up from $4.58 30 days ago. This would mark a 25% year-over-year increase.
Estimates for next year are also on the rise and projecting 5% growth. Forecasts are averaging $5.05, up from $4.81 over the past month.
Industry Comparison
While Universal’s ROE is in line with the industry average at 12.7%, its net profit marking is almost double, at 4.8%. Additionally, the company accomplishes this with a debt-to-equity ratio of just 0.4, compared to the industry norm of over 34 times.
The Chart
Earnings estimates for UHS are at the highest level in over 5 years. Not only that, but the Zacks Consensus Estimate is climbing rapidly and with a forward P/E of just 12 times, the stock has plenty of room to grow. Take a look at the chart below.
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