Universal Health Services stock supported by CMS approvals and reduced downside risks By Investing.com

Universal Health Services stock supported by CMS approvals and reduced downside risks By Investing.com

On Tuesday, TD Cowen analysts maintained a Buy rating for Universal Health Services (NYSE:) with a steady price target of $251.00. According to InvestingPro analysis, UHS appears undervalued, trading at a P/E ratio of 12.07 with a market capitalization of $12.29 billion.

The analysts expressed confidence in the resilience of the State Directed Payment (SDP) program, which they believe will continue to support hospitals. They anticipate that the program’s benefits are more enduring than the market currently acknowledges.

The firm expects that the Centers for Medicare and Medicaid Services (CMS) will approve SDP enhancements in Tennessee and the District of Columbia, with Texas likely to finalize its own SDP enhancement through state rulemaking. Looking further ahead, there is anticipation that CMS might also endorse SDP enhancements in Florida and California before the end of 2025.

TD Cowen also noted the ongoing litigation in Texas and Florida against CMS concerning the interpretation of SDP “hold harmless” regulations. Despite the inherent risks associated with their choice, analysts argue that UHS’s current trading position below its 10-year average multiple presents less exposure to exchange downside and potential site neutrality issues compared to its peers. InvestingPro data supports this positive outlook, highlighting UHS’s perfect Piotroski Score of 9 and an overall financial health rating of “GREAT.”

The $251 price target is based on 8.8 times the firm’s 2025 estimated EBITDA of $2.4 billion, or 8.1 times the 2025 proforma EBITDA estimate, which includes SDP benefits for the District of Columbia, Tennessee, and Nevada. These benefits are estimated to be around $190 million collectively for UHS.

However, the analysts clarified that their model does not reflect these amounts as the precise timing of program approvals and their inclusion in consensus or actual financials remains uncertain. For deeper insights into UHS’s valuation and growth potential, investors can access the comprehensive Pro Research Report, along with 8 additional ProTips available on InvestingPro.

In other recent news, Universal Health Services (UHS) has been the center of several significant developments. The company reported a net income of $3.80 per diluted share and an 8.6% revenue growth, alongside a declaration of a $0.20 per share cash dividend, underscoring its commitment to shareholders.

Goldman Sachs downgraded UHS stock from Buy to Neutral due to anticipated policy risks, setting a new price target of $197.00. Despite this downgrade, the firm remains neutral on specific policy outcomes, particularly changes to Medicaid or the Affordable Care Act.

TD Cowen, despite reducing UHS’s stock price target from $275.00 to $251.00, maintained its Buy rating, expressing confidence in UHS as a top pick for 2025. BofA Securities, on the other hand, downgraded UHS from a Buy to a Neutral rating, adjusting the stock target to $223 due to potential risks. KeyBanc Capital Markets maintained its Sector Weight rating on UHS shares, indicating an expectation of average sector returns.

These recent developments come as UHS plans facility openings in Las Vegas, D.C., and Florida, projecting a 6% to 7% revenue growth in acute care and mid-to-upper single-digit revenue growth in the behavioral health segment in 2025.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Comments

No comments yet. Why don’t you start the discussion?

Leave a Reply

Your email address will not be published. Required fields are marked *