Free Universal Health Services Financial and Stock Analysis Essay Sample
Universal Health Services (UHS) Inc. is a real estate investment trust registered with the NYSE under Healthcare/Healthcare Facilities. UHS is operates 25 Acute care hospitals, 206 Behavioral health centers, surgical hospitals, radiation oncology centers and ambulatory surgery centers distributed across 37 States in North America. In November 2010, UHS acquired the Psychiatric Solutions, Inc. (PSI) giving the company a fairer advantage over possible competitors in providing surgery, internal medicine, obstetrics, coronary care and pediatric services across United States. Revenue increased by 42% from $1.4 billion in 2010 to $1.9 billion due to the acquisition of PSI and behavioral health care facilities that were attached to the acquisition deal. The reason why the stock price remained fairly constant was because the cost of acquiring PSI and the behavioral centers that suppressed the expressed revenue increase such that the net revenue increased marginal from $7.6 billion to $7.7 billion during the first quarter of 2011. The share price rated according to 52 weeks high recorded $56.46 and 52 week low of $32.89.
Universal Health Services Inc. results for the first quarter as of March 2011 according to the Company CEO Alan Miller claims that the company recorded a net income of $1.15 per diluted share. Revenues increased by 6.6% in the acute care division (Universal Health Services Inc, 2011). Equally, revenue rose by 5.9% per adjusted admission due to structural changes in pay-offs and acuity systems. Averagely, the Universal Health Services Inc. spent a total of $223 million to provide acute division charity and a further $176 million as insured discounts referred to set rates. Accordingly, the Universal Health Services Inc operating margins increased by 18% during the first quarter 2011 compared to the close of the 2010 last quarter when the margins stood at 16.1% (Universal Health Services Inc., 2011). Operating margins are defined as income less salaries, wages, and benefits and operating expenses such as supplies and provision for other expenses. Revenue equally increased in the behavioral health division by 6.5% at the close of the first quarter 2011. Also, revenue per adjusted patient day equally rose by 4.6% when compared with 2010 during the same time. Many business strategists claim that the revenue increased because of a business shift from residential to acute business with the acquisition of a new PSI facility. Cash flow from operating activities raised $183 million compared to $139 million during the 2010 first quarter. Of the $183 million that was collected as revenue, $57 million went into capital expenditure at the end of first quarter 2011. Therefore, the share price is likely to maintain an upward trend according to the revenue collected and the capital spend minding the fact that the ratio f debt-to-total capitalization is 65% while the ratio of debt-to-EBITDA remains 4.4 times (Universal Health Services Inc, 2011). UHS Earnings stock analysis reveals that the month of December just after acquisition of the PSI, the stock exchange rate remains as low as below the 1.014 million mark. The best price for the share sales in volumes was recorded on the 27th October 2010 and during the last day of February 2011 when it hit the volume 3.041 million.
The stock traded at 6.9% premium when taken and calculated to its fair value that was recorded as $30.41 during the last quarter of 2010. In the dividend analytical data, UHS company stock earned a star for its debt to total capital being less than 45% (). The highest value of the share reached $56.46 during the month of April. The share price started at a low of $32.89 per share during the beginning of September 2010. The share price climbed steadily till it hit a top high in the last climbing steadily during the month of September to hit a high of $37.75 before dropping again slightly during the month of October. Nevertheless, the share prices gained again steadily during the months of November, December and January steadily to hit a price above $45 dollars. The climbing share price is attributed to the smart acquisition of PSI and behavioral clinics centers that added to the value of the UHS thus attracting more buyers than seller pushing the price above the $32 mark to $45. During the month of February, business activity was recorded lower than expected by $3 dollars such that averagely the price of share comes down to $42 dollars. The low value of the share price during the month of February 2011can be said to have been caused by market concerns about the impacts of recession particularly speculators who thought that UHS was equally being hit by economic recession and credit crutch as a result of the company’s expenditure following acquisition of more health centers from the PSI deal. The anomaly is seen also during the month of April when the lowest price hit slightly below $45 dollars. However the month of March allowed the price to increase by three dollar such that after the April hiccups, the price jumped up to $52 dollars experiencing a high of $56, the highest for the whole of 2011 this far before averaging out at $53. Also the month of April recorded the highest volume of sales hitting above 3 million shares that exchanged at NYSE. The month of May recorded the highest share price averaging at $53 with an average sale of shares in volumes depressing to below 1 million (UHSINC, 2011). During the months of June and July averaged at $50.5 all through. The release of profit and increase of share price during the month of March influenced the buying and selling trend of shares. Particularly, the price increased to the highest figure of 56 per share during the months late April and earlier May as a result of speculators approving the first quarter report that indicated the company had profited. However, the price drastically resumed a low trend, losing throughout the month of August from above $50 dollars to a low of $35 dollars. Seemingly, volume of buying shared come down by 4.7 million during the first day of August. High capital depreciation helped the company gain more share buyers but the high buyout and the extreme appreciation of the share to $56 dollars brought about low following low demand for the shares that caused a slump in the price.
The top two main competitors against UHS are Community Health Systems (NYSE:CYH) and Mednax Inc. (NYSE:CYH), yet the two companies lack the capital capacity to compete favorably against UHS. UHS has double the number of shares that MD has and though CYH has a higher number of shares by one million, the price per share is almost half the value of shares associated with UHS. UHS shares are better placed in terms of gaining value than the competitor companies more particularly after acquiring PSI.
July was marked with announcements that the net income increased to $103.6 million that represented 1.04 per diluted share compared with the previous first quarter’s net income of $65.6 million that represented $0.67 per diluted share. The second quarter record 2010 recorded a low price of $0.68 per diluted share compared with the 2011 second quarter’s $1.03. However, the second quarter share price remains lower compared to the first quarter 2011 price of $1.15 per diluted share. Therefore, there was a high buying out of shares that the prices went up instantly only to slump down again during august citing tough economic times in the United States. The second quarter recorded an increase of revenues by 42% to stand at $1.90 billion compared to the 2010 second quarter’s $1.34 billion, thus the PSI acquisition in November 2010 increased the net growth of revenue, share price and stocks attracted a higher market.
During the first six months of 2011, the UHS net income increased to $217.8 million representing $2.20 per diluted share compared with 137.4 million or $1.40 per diluted share in 2010. Therefore the value of UHS shares increased favorably from $1.40 to $2.20 that represents an increment value of $0.8. During the first six-months closing at end of June 30th 2011 the net revenue recorded was $3.81 billion that is an increase of 42% from the previous 2010 net revenue of $2.69 billion. The revenue increment is attributed to behavioral health care facilities that were acquired from PSI.
Basic earnings per share for three months ending June 30th reveal that the basic earnings per UHS share stood at $1.06 while for six months ending same time is $2.23 dollars; therefore, the share value increased when compared with the 2010 statistics that stood at $0.68 for three months before June 30th and $1.42 dollars for six month. An increase of 2.23 minus 1.42 expressed as a percentage disclose that the value of UHS increased by 57%. In conclusion, since the shares have fallen to $37 dollars per share, it is time to invest since the price will increase.