On Monday, Cantor Fitzgerald adjusted its price target on shares of Universal Health Services (NYSE:), increasing it to $227.00 from the previous figure of $219.00. The firm has decided to maintain a Neutral rating on the stock.
The adjustment comes as the analyst anticipates continued growth in acute trends. The new 12-month price target is based on a 7.9x 2026 estimated EV/EBITDA multiple. This valuation reflects not only the expected growth but also positions the stock at a slight discount relative to its historical performance and its peers.
The target multiple is set at a 1% discount to Universal Health Services’ five-year historical average. It also represents a 22% discount compared to the average of the provider peer group and a 19% discount to peer Acadia Healthcare (NASDAQ:) Company Inc. (NASDAQ:ACHC).
The larger discount applied to Universal Health Services is attributed to its higher exposure to inpatient psychiatric services, which typically experience slower growth than comprehensive treatment centers (CTC).
The analyst outlined several factors that could influence the stock’s performance, including contract labor utilization and pricing, clinical employee recruitment and retention, and exposure to faster-growing healthcare segments like outpatient surgical and outpatient psychiatric services.
Additionally, the potential under-investment in technology and efficiency tools, along with the risk of not returning to pre-pandemic margin levels, were identified as downside risks to the price target.
In other recent news, Universal Health Services (UHS) disclosed its third-quarter 2024 financial results, reporting a net income of $3.80 per diluted share and an adjusted net income of $3.71 per share. The company also experienced an 8.6% revenue growth, excluding its insurance subsidiary, driven partially by a slight increase in acute care volumes.
RBC Capital Markets adjusted its price target for UHS, reducing it to $211 from the previous $222 while retaining a Sector Perform rating on the stock, following a significant drop in the company’s share value. Despite this, Deutsche Bank maintained its Buy rating on UHS, setting a steadfast price target of $240, expressing a positive outlook on the company’s growth prospects.
UHS is also making strategic investments and operational improvements, with upcoming facility openings planned in Las Vegas, D.C., and Florida. The company projects a 6% to 7% revenue growth in acute care and mid-to-upper single-digit revenue growth in the behavioral health segment in 2025.
Analysts from RBC Capital and Deutsche Bank have provided their insights, indicating that the stock might not outperform the market, but it is not expected to significantly underperform either. The firm’s reiterated $240 price target reflects this confidence in UHS’s performance moving forward. These are the most recent developments in the company’s financial performance and strategic initiatives.
InvestingPro Insights
Universal Health Services (UHS) demonstrates strong financial performance and market positioning, as evidenced by recent InvestingPro data. The company’s P/E ratio of 13.49 aligns with Cantor Fitzgerald’s valuation perspective, suggesting the stock may be reasonably priced relative to its earnings. UHS has shown impressive revenue growth, with a 9.93% increase over the last twelve months and an 11.23% quarterly growth in Q3 2024, indicating the continued growth in acute trends that the analyst anticipates.
InvestingPro Tips highlight UHS’s financial strength and shareholder-friendly policies. The company has maintained dividend payments for 22 consecutive years, demonstrating a commitment to returning value to shareholders. Additionally, management has been aggressively buying back shares, which could potentially boost earnings per share and stock value.
The stock’s recent performance has been notable, with a 65.14% price total return over the past year, despite a recent 13.21% drop in the last week. This volatility aligns with the analyst’s discussion of factors that could influence stock performance, such as labor utilization and healthcare segment exposure.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for UHS, providing deeper insights into the company’s financial health and market position.
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