Universal Health Services, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Investors in Universal Health Services, Inc. (NYSE:UHS) had a good week, as its shares rose 7.5% to close at US$165 following the release of its first-quarter results. Revenues were US$3.8b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$3.82, an impressive 21% ahead of estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Universal Health Services

Taking into account the latest results, the most recent consensus for Universal Health Services from 14 analysts is for revenues of US$15.6b in 2024. If met, it would imply a reasonable 6.4% increase on its revenue over the past 12 months. Per-share earnings are expected to step up 14% to US$13.84. Before this earnings report, the analysts had been forecasting revenues of US$15.5b and earnings per share (EPS) of US$13.44 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$188, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. There are some variant perceptions on Universal Health Services, with the most bullish analyst valuing it at US$205 and the most bearish at US$156 per share. This is a very narrow spread of estimates, implying either that Universal Health Services is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Universal Health Services' rate of growth is expected to accelerate meaningfully, with the forecast 8.6% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 6.0% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.7% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Universal Health Services to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Universal Health Services' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Universal Health Services analysts - going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for Universal Health Services that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.