Deutsche Bank Reiterates Buy Rating on Universal Health Services (UHS)
Deutsche Bank analyst Pito Chickering reiterated a Buy rating and $240.00 price target on Universal Health Services (NYSE: UHS)
The analyst comments "Net-net. While the election may be an overhang over the next couple of weeks, especially given Trump’s position on exchange subsidies; ultimately, we don’t believe UHS deserves to be down almost 10% today. The 3Q performance and lack of an increase to guidance wasn’t enough to support the stock at these levels, but we see little to no fundamental changes in the growth outlook. Hence, despite the likelihood of returning to a more normalized demand and pricing environment in 2025, we believe this is more than baked into the valuation and today’s stock action makes for an attractive entry point to capture a rebound going into year end. When we step back and take a deep breath after today’s pullback, we look at 2024 EBITDA growth and more normalized 2025 EBITDA growth of HSD and the 8x multiple seems like an extremely favorable multiple. UHS is in the middle of its 10 year EV/ EBITDA multiple and at the lower end of its PE multiple, despite the fact that EBITDA growth looks to be the best in a decade. Part of it is fueled by supplemental payments, but a lot of it is just due to core ops in both businesses. Acute continues to truck along on top line and EBITDA and behavioral is finally starting to grow top and bottom line. So after being stuck as low EBITDA growth company, we expect it may take a while for investors to fully value a normalized growth rate for UHS, and hence believe the pullback provides a solid entry price and we reiterate our buy rating and $240 TP."
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Shares of Universal Health Services closed at $202.75 yesterday.