On Monday, UBS analyst upgraded shares of Universal Health Services (NYSE:UHS) from Neutral to Buy, lifting the price target to $226 from the previous $189. The upgrade reflects a positive outlook on the company's earnings potential and operational improvements, particularly in its behavioral health services.
Universal Health Services, which experienced slower patient day growth between 0.5-2.0% since 2021 due to the pandemic and labor shortages, is now expected to rebound. With a more stable labor market, UHS is anticipated to increase staffing and meet the growing demand for behavioral health services. The analyst projects that UHS will resume its long-term volume growth trend of 3-4% in this segment.
The company's pricing strength is also expected to continue, compensating for any potential fluctuations in volume. Commercial payers are providing above-average rate updates due to a constrained supply environment, and Medicaid supplemental payments are set to offer additional support. Notably, a new program in Tennessee could contribute approximately 2% annually to UHS's consolidated EBITDA.
Looking ahead, UBS forecasts a 7% growth in same facility revenue per adjusted admission for UHS in 2024, followed by a 5.5% increase in 2025. These projections are based on the anticipated strong pricing increases across the company's services.
InvestingPro Insights
Following the upgrade by UBS, it's notable that Universal Health Services (NYSE:UHS) holds a perfect Piotroski Score of 9, indicating a strong financial position. This score is a testament to the company's operational efficiency and financial health. Additionally, the company's management has been actively buying back shares, which could signal their confidence in the company's future performance and a potentially positive impact on shareholder value.
InvestingPro data further complements the positive outlook, with a P/E Ratio standing at a competitive 14.92 and an adjusted P/E Ratio for the last twelve months as of Q1 2024 at 14.57, suggesting the stock may be undervalued relative to its earnings growth. Moreover, UHS has demonstrated a robust revenue growth of nearly 8% for the last twelve months as of Q1 2024, with a gross profit margin of 40.28%, underscoring the company's profitability and operational effectiveness.
Investors looking to delve deeper into UHS's financials and future prospects can find additional "InvestingPro Tips" on the company's performance and analyst predictions. There are 11 more tips available, offering insights into aspects such as earnings revisions, trading patterns, and dividend reliability. To access these insights and optimize your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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