Jefferies Starts Universal Health Services (UHS) at Hold, Psychiatric Solutions Acquisition Deepens Presence in Behavior Health Segment

Jefferies initiates coverage on shares of Universal Health Services (NYSE: UHS) with a Hold rating and $52 price target.

The firm believes that the Psychiatric Solutions acquisition deepens the Company's presence in the fast-growing behavior health segment, but notes that incremental cost synergies above $35-$45 million may take a couple of years. Further margin improvement opportunities will likely come in 2012 or 2013.

The Company's new capacity at facilities in Palmdale, CA; in Las Vegas, NV; and in Dennison, TX should drive volumes and earnings, as occupancy increases.

Jefferies comments that UHS has solid financial flexibility to repay debt, make acquisitions, pay dividends, and repurchase stock with its $30 million in cash on its balance sheet, and $452 million available on its revolver and strong FCF.

The firm is releasing its 2011 and 2012 EPS estimates at $3.74 and $4.18 and its revenue estimates at $7,649.1 million and $8,017.8 million.

For more ratings news on Universal Health Services click here and for the rating history of Universal Health Services click here.

Shares of Universal Health Services closed at $47.20 yesterday.

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