Universal Health Services (UHS) Price Target Raised To $41

Baird analysts Whit Mayo and Matthew Gillmor reiterated their Outperform rating for shares of Universal Health Services, Inc. (NYSE: UHS) and raised their price target from $40 to $41.

The Baird analysts said that guidance was positive and commented that, "adjusted for $0.18 in lost earnings from TX DSH reductions, guidance implies the underlying EPS growth rate is ~10%, which is 2x higher than Street models previously contemplated. We see steady upside to numbers as UHS puts cash to work via share buybacks. It's interesting to observe the very large FCF power of UHS over the next 2 years, coupled with an upcoming refi and extremely low leverage. Buybacks should become much more pronounced."

They also noted that Universal Health Services' 4th quarter earnings per share of 57 cents were 30% higher than the previous year and 18% higher than the consensus forecast. The growth in earnings was fueled by improved margins, good cost controls and stabilizing bad debt.