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SEPTEMBER 15, 2003
In Rude Health at UHS Despite the inhospitable climate prevailing in hospital management, the industry's No. 3, Universal Health Services (UHS ), is in the pink, with earnings and revenues beating expectations. Its shares have soared, too -- from 32 on Feb. 14 to 50 on Sept. 3. Some hospital outfits are under investigation for accounting fraud, scaring off investors. CEO Alan Miller, who formed Universal in 1978 with venture-capital backing, says: "We don't do any funny stuff with our numbers. We grow the old-fashioned way, through hard work and modest acquisitions." Like its rivals, Universal has been hurt by the soft economy, which has caused its share of uninsured and underinsured patients to rise. Nonetheless, says Miller, Universal, which owns and operates about 100 hospitals, has had 29% average returns for the past 10 years. Some analysts say the stock still has room to climb. Lori Price of J.P. Morgan Securities, who rates UHS "overweight," sees "compelling growth opportunities" and notes that it is trading at just 7.1 times her 2003 EBITDA estimates -- below the industry average of 7.8 and well below 9.5 for Health Management Associates (HMA ), its closest rival. In the next year, "Universal will outperform many of its peers," says Price. Her price target is 60. John Ransom of Raymond James & Associates says that, with Universal selling at just 14 times his 2003 estimate of $3.26 a share on sales of $3.6 billion and at 12.4 times his 2004 forecast of $3.69 on $3.9 billion sales, it is a "strong buy." Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.  By Gene G. Marcial
BW MALL
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