Debt Rise Can’t Offset Strong Year for Hospital Operator UHS

Universal Health Services said yesterday it posted strong fourth quarter profits on higher revenue from its acute care and behavioral health facilities businesses, well above analysts’ expectations.

The hospital operator based in King of Prussia, Pa., said it earned $39.6 million, or an adjusted 74 cents a share, up 17 percent, in the quarter ended December 31, 2007, compared to 63 cents a share a year ago. Analysts forecast an average of 70 cents a share.

The strong fourth quarter profit stemmed from a 12 percent increase in revenue to nearly $1.2 billion. UHS said its acute care business grew 7.6 percent, although inpatient admissions were unchanged and patient days decreased 1.4 percent. Meanwhile, revenue from its behavioral health business rose 9.5 percent during the quarter.

"We would characterize the results as a positive surprise with higher margins offsetting lower than anticipated revenue," Lehman Brothers analyst Adam Feinstein said today in a morning note to investors.

For the year, UHS said it earned $3.18 cents a share on a 13 percent increase in net revenues of $4.75 billion. The company said it set aside $104 million for doubtful accounts in the fourth quarter, up from $88.9 million in the fourth quarter of 2006. UHS also said its acute care hospitals provided $130 million in charity care and uninsured discounts in the fourth quarter, compared to $117 million during the year ago period. For the year, it provided $548 million in charity care and uninsured discounts, compared to $443 million in 2006.

For 2008, UHS said it expects to earn between $3.37 and $3.42 a share from continuing operations. Analysts are forecasting earnings of $3.37 a share. Feinstein sees UHS’ prospects as positive. "We believe that this release will be viewed favorably following a volatile earnings season and we would expect the shares to trade higher," Feinstein said.