Universal Health Services, Inc. (NYSE:UHS) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$2.9b, some 4.8% above estimates, and statutory earnings per share (EPS) coming in at US$2.82, 42% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Universal Health Services after the latest results.
Following the latest results, Universal Health Services' ten analysts are now forecasting revenues of US$12.1b in 2021. This would be a satisfactory 6.4% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 20% to US$10.19. Before this earnings report, the analysts had been forecasting revenues of US$12.1b and earnings per share (EPS) of US$10.33 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of US$131, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Universal Health Services at US$145 per share, while the most bearish prices it at US$115. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Universal Health Services' growth to accelerate, with the forecast 6.4% growth ranking favourably alongside historical growth of 4.9% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 6.8% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Universal Health Services is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Universal Health Services. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Universal Health Services going out to 2022, and you can see them free on our platform here..
Before you take the next step you should know about the 1 warning sign for Universal Health Services that we have uncovered.
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