On Monday, Deutsche Bank reiterated its Buy rating on Universal Health Services (NYSE:UHS) with a steadfast price target of $240.00. Despite the recent nearly 10% drop in UHS shares, the firm holds a positive outlook on the company's growth prospects. The third-quarter performance and unchanged guidance did not bolster stock prices to expected levels, but the firm sees no significant changes to the fundamental growth outlook for UHS.
According to the analyst from Deutsche Bank, the current political climate, particularly concerning healthcare subsidies, could weigh on the stock in the short term. However, the analyst believes the current market reaction has provided an attractive entry point for investors looking to capitalize on a potential rebound by the end of the year. The firm anticipates that despite a return to a more normalized demand and pricing environment in 2025, these factors have already been accounted for in UHS's valuation.
The analyst also highlighted UHS's EBITDA growth for 2024 and the expected high single-digit EBITDA growth for 2025, viewing the 8x multiple as extremely favorable. UHS's financials are reportedly at a decade peak, with EBITDA growth being the strongest it has seen in years. This growth is partly driven by supplemental payments but is also attributed to solid operations in both acute care and behavioral health services.
Universal Health Services has been previously characterized by low EBITDA growth, but the analyst suggests that it may take time for the market to fully recognize and value the company's normalized growth rate. The pullback in UHS's stock price is seen as an opportunity for investors to establish or increase their position in the company at what Deutsche Bank considers a solid entry price. The firm's reiterated $240 price target reflects this confidence in UHS's performance moving forward.
In other recent news, Universal Health Services (UHS) disclosed its third-quarter 2024 financial results, reporting a net income of $3.80 per diluted share and an adjusted net income of $3.71 per share. The company experienced a slight increase in acute care volumes and an 8.6% revenue growth, excluding its insurance subsidiary. Despite challenges such as a recent hurricane and increased corporate expenses, UHS is making strategic investments and operational improvements aimed at driving future growth.
The company has announced upcoming facility openings in Las Vegas, D.C., and Florida, which are expected to contribute to future growth. Furthermore, UHS anticipates moderate acute care revenue growth and aims for 3% same-store patient day growth in behavioral health by the end of 2024. The company's capital expenditures are focused on facility expansions and share repurchases.
In terms of future expectations, UHS projects a 6% to 7% revenue growth in acute care and mid-to-upper single-digit revenue growth in the behavioral health segment in 2025. The company also plans to expand outpatient and telehealth services due to rising demand.
InvestingPro Insights
The recent analysis from Deutsche Bank aligns with several key metrics and insights from InvestingPro. Universal Health Services (NYSE:UHS) currently trades at a P/E ratio of 13.49, which is relatively low compared to its impressive revenue growth of 9.93% over the last twelve months. This growth is further emphasized by the company's strong EBITDA growth of 22.49% during the same period, supporting Deutsche Bank's positive outlook on UHS's growth prospects.
InvestingPro Tips highlight that UHS is trading at a low P/E ratio relative to its near-term earnings growth, which corroborates the analyst's view of an attractive entry point for investors. Additionally, the company's valuation implies a strong free cash flow yield, potentially indicating undervaluation in line with Deutsche Bank's assessment.
The company's financial strength is further underscored by its perfect Piotroski Score of 9, as noted in the InvestingPro Tips. This score suggests that UHS has solid financial health, which could support the analyst's confidence in the company's future performance.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for UHS, providing a deeper understanding of the company's financial position and market potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.