On Friday, BofA Securities updated its outlook on Universal Health Services (NYSE:UHS) shares, increasing the price target to $235 from $225 while sustaining a Buy rating on the stock.
The revision follows Universal Health Services' recent guidance update, which indicated a balanced contribution from supplemental payments and core business performance. The company has kept its volume and pricing forecast consistent for the second half of the year.
The analyst at BofA Securities highlighted that the guidance does not account for potential new supplemental payments that are pending approval in Tennessee and the District of Columbia.
Tennessee's additional payments for behavioral services could amount to $52-$56 million annually and may be applied retroactively from July 1. In the District of Columbia, both acute and behavioral services could see an increase of $80-90 million, with a retroactive application from October 1.
The report also noted that other states are considering the implementation of similar supplemental payment programs. The anticipated benefits from these programs could lead to a 6% increase in EBITDA for Universal Health Services.
As a result, BofA Securities has adjusted its price objective to $235, which reflects an 8.8x multiple on the company's projected 2025 EBITDA, up from the previous 8.5x multiple.
The analyst's comments underscore the significant role that supplemental payments play in the company's financial outlook and the potential for additional upside should the pending state approvals come through.
Universal Health Services' maintained outlook for core volume and pricing in the latter half of the year provides a stable backdrop to the anticipated benefits from new supplemental payments.
In other recent news, Nestle SA (SIX:NESN) faces a stock downgrade from UBS due to persistent pricing pressures and missed organic sales growth targets. This comes on the heels of the company's latest quarterly report showcasing a mere 3% increase in its key growth drivers, a stark contrast to the average 6.5% growth rate over the past six years. Moreover, only 56% of Nestle's leading products are maintaining or gaining market share amidst intense competition.
In a different vein, Universal Health Services has seen several upgrades and adjustments in its stock ratings and price targets. Cantor Fitzgerald, Baird, and UBS have all upgraded the company's stock, citing potential for significant earnings growth. In addition, RBC Capital and TD Cowen have adjusted their price targets in response to the company's strong first quarter performance in 2024.
Universal Health Services also declared a cash dividend of $0.20 per share, scheduled for disbursement in June, demonstrating its commitment to delivering value to shareholders. Meanwhile, Oscar Health, a healthcare technology company, reported a significant beat on both earnings and revenue for Q1 2024. These are among the recent developments that provide investors with updated perspectives on the financial performance and growth potential of these companies.
InvestingPro Insights
Universal Health Services (NYSE:UHS) appears to be in a strong financial position, with a market capitalization of $13.72 billion and a solid price-to-earnings (P/E) ratio of 14.96, which is even more attractive considering the adjusted P/E for the last twelve months as of Q2 2024 is 14.78. The company's revenue growth has been robust, posting an 8.83% increase over the last twelve months as of Q2 2024, with a notable quarterly growth rate of 10.13%. This financial health is underpinned by a significant gross profit margin of 41.09%, demonstrating the company's efficiency in managing its operations.
An InvestingPro Tip highlights that Universal Health Services has a perfect Piotroski Score of 9, indicating strong financial health and stability. Additionally, management's aggressive share buybacks could signal confidence in the company's future prospects, a sentiment echoed by five analysts who have revised their earnings upwards for the upcoming period. For investors interested in more detailed analysis and additional InvestingPro Tips, there are 12 more tips available for Universal Health Services at Investing.com/pro/UHS. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
The company's commitment to shareholder returns is evident with its track record of maintaining dividend payments for 22 consecutive years. Moreover, with the stock trading near its 52-week high and showing a strong return over the last three months, investors may find Universal Health Services an attractive option within the Healthcare Providers & Services industry.
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