Leerink Partners Raises Price Target on Universal Health (UHS) Following 2Q EPS Beat

Leerink Partners reiterated an Outperform rating on Universal Health Services (NYSE: UHS), and raises the price target to $165.00 (from $155.00), following 2Q results. 2Q EBITDA of $433MM and Adj. EPS at $1.85 beat consensus at $404MM and $1.63 respectively. 2015 EPS guidance was raised by 9% to $6.75-7.15 which implies the EBITDA guidance raise by ~$100MM to $1,700MM at mean.

Analyst Ana Gupte commented, "UHS posted a strong 2Q with top & bottom-line beats. Solid beat on Same Store (SS) acute care volume growth was on back of ACA benefits from accelerated Exchange and Medicaid enrollment combined with increased Medicare utilization. Management also cited economic improvement, especially in CA and Las Vegas markets, as a strong volume driver. UHS expects the volume growth to temper down in the remainder of 2015 to 3-3.5% range. Unit pricing growth missed estimates partially driven by increase in low paying Medicare admissions. Though TX market growth lagged CA and Las Vegas in relative terms, but Management does not see any near term Medicaid funding pressure in the oil and gas prices hit economy. This, combined with strong acute care performance, has driven the Management to raise the previously conservative 2015 EPS guidance by 60c. After a margin beat in 2Q, we expect EBITDA margin improvement to continue in rest of 2015 driven by strong operating leverage on back of solid volume growth. Medium-term growth story is defensive and predictable at 7% EBITDA CAGR. Finalization of CMS’s proposal of partial IMD (Institution for Mental Diseases) exclusion lift may provide a further EBITDA upside of 4%. Balance sheet remains strong with low leverage and Management continues to evaluate new M&A opportunities, both in US and UK. UHS remains our top Hospital pick given its near-term upside to consensus. We reiterate our Out Perform rating and raise our Price Target from $155 to $165."

For an analyst ratings summary and ratings history on Universal Health Services click here. For more ratings news on Universal Health Services click here.

Shares of Universal Health Services closed at $145.23 yesterday.

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