Select Medical (SEM) Q3 Earnings Beat, Hikes '21 EPS View
Select Medical's (SEM) third-quarter results reflect solid revenues driven by strong segmental contributions, and an uptick in admissions and patient visits, partly offset by elevated costs.
Select Medical Holdings Corporation SEM reported third-quarter 2021 adjusted earnings of 57 cents per share, which surpassed the Zacks Consensus Estimate by 9.6%. The bottom line improved 1.8% year over year.
The company’s results were driven by strong revenue growth, higher admissions at Rehabilitation Hospital segment, and increased patient visits at the Outpatient Rehabilitation and Concentra segments. However, the upside was partly offset by elevated costs and decline in admissions at the Critical Illness Recovery Hospital segment.
Net operating revenues advanced 7.8% year over year to $1.5 billion in the third quarter, courtesy of solid contributions from all the four segments of the company. The top line beat the consensus mark by 2.4%.
Total costs and expenses increased 9.4% year over year to $1.4 billion mainly due to 9.9% and 6.7% rise in cost of services, and general and administrative expenses, respectively.
During the quarter under review, the company’s adjusted EBITDA of $208.6 million dipped 2.2% year over year.
Select Medical Holdings Corporation Price, Consensus and EPS Surprise
Critical Illness Recovery Hospital
Operating revenues at the segment rose 2.2% year over year to $530.6 million. However, patient days slipped 2.4% year over year in the third quarter. Adjusted EBITDA of $57.2 million plunged 35.6% year over year.
Rehabilitation Hospital Segment
The segment’s operating revenues amounted to $212.4 million, which climbed 13% year over year, courtesy of 7.6% growth in patient days. Adjusted EBITDA of $44.1 million dipped 1.1% year over year in the quarter under review.
The segment reported operating revenues of $274.5 million, which climbed 14.4% year over year on the back of 18.3% increase in patient visits. In the quarter under review, adjusted EBITDA grew 26.6% year over year to $38.8 million.
Operating revenues of $442.2 million improved 12.8% year over year in the third quarter, attributable to 14% rise in patient visits. Adjusted EBITDA climbed 23.9% year over year to $99.8 million.
Financial Position (as of Sep 30, 2021)
Select Medical exited the third quarter with cash and cash equivalents of $748 million, which grew 29.6% from the 2020-end level.
Long-term debt, net of current portion, amounted to $3.4 billion, which dipped 0.2% from the figure at the 2020 end.
Total equity of $1.4 billion increased 8.8% from the figure as of Dec 31, 2020.
Net cash provided by operating activities in the third quarter totaled $99 million, which slipped 26.4% year over year.
Share Repurchase & Dividend Update
The company bought back shares worth around $47.5 million in the third quarter. Besides, the company’s board of directors authorized an increase in its share repurchase program on Nov 2, 2021. The increase enables the company to buy back shares worth $1 billion (up from the prior capacity to repurchase shares worth $500 million). The program will now run till the end of 2023.
The company’s board of directors approved a cash dividend of 12.5 cents per share on Nov 2, 2021. The dividend will be paid on or about Nov 29, 2021 to shareholders of record as on Nov 16, 2021.
2021 Business Outlook Updated
Concurrent with third-quarter results, Select Medical has updated its business outlook for 2021 with respect to the following metrics.
Revenues are now projected to be $6.05-$6.15 billion, higher from earlier guidance of $5.85-$6.05 billion.
Adjusted EBITDA for 2021 is estimated to lie within $980 million and $1 billion. The previous outlook expected the metric between $970 million and $1 billion.
Earnings per common share is anticipated between $2.98-$3.09, which is higher compared to the prior projection of $2.91-$3.08.
Over the 2021-2023 period, the company’s long-term guidance for revenues, adjusted EBITDA and earnings per common share remained unchanged from the prior outlook.
Select Medical currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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