COMPANY DESCRIPTION

Universal Health Services owns and operates, through its subsidiaries, acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers. As of Feb 27 2014, Co. owned and/or operated 24 acute care hospitals and 193 behavioral health centers located in 37 states, Washington, D.C., Puerto Rico and the U.S. Virgin Islands. As part of its ambulatory treatment centers division, Co. manages and/or owns outright or in partnerships with physicians, five surgical hospitals and surgery and radiation oncology centers located in four states. Co.'s operating segments consist of acute care hospital services and behavioral health care services.

 

ECONOMIC MOAT

UHS does not have an economic moat in our opinion.  UHS relies on superior execution for success.

 

OUTLOOK

Universal Health Services closed out 2014 on a strong note. Revenues at these centers jumped 14.9%. The number of patients showing up at UHS facilities with no insurance has been very beneficial to results. This change, brought on by the onset of the Affordable Care Act, has been an even bigger boon to Universal than most had anticipated. Acquisitions have UHS operating 216 behavioral health centers as of the close of 2014. The 2016-2018 time period look promising.  UHS is pursuing a buildout of the company's presence in the United Kingdom now with 17 facilities from the 2014 Cygnet Health Care Limited purchase. The stock trades at fair value with the recent run-up in share price.

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STRENGTHS

  • Comprehensive health care services portfolio helping the company in revenue sustenance

  • Acquisition helped UHS in enhancing its behavioral health business 

WEAKNESSES

  • High level of indebtedness affecting UHS' financial flexibility 

THREATS

  • Reduction in reimbursement level could affect the company’s operating profit margin

  • Competition from specialty clinics may pose significant threat

  • Shortage of qualified nurses may impact the quality of services 

OPPORTUNITIES

  • Acquisition of Cygnet likely to help UHS expand its services in the UK

  • Establishing new healthcare facilities

  • Favorable trends in demography and healthcare spending likely to spur demand for healthcare services 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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