UBS maintained its buy recommendation for Universal Health Services (UHS) on Monday, raising its price target to $290 from the prior level while citing the company’s improved leverage profile and earnings outlook following a $1.1 billion senior notes offering and the acquisition of Talkspace.
The Swiss bank’s valuation implies a potential 69% upside to UHS’s Aug. 28 closing price of $171.66, which fell 0.53% on the day. UHS’s market capitalization stands at $10.12 billion, with a price-to-earnings ratio of 6.98 and total debt of $5.26 billion. EBITDA reached $2.7 billion, while InvestingPro’s financial health score for the company was rated “great” at 3.34 out of 5.
The company used proceeds from the $1.1 billion senior secured notes offering—split across two tranches—to refinance existing debt and fund the $835 million acquisition of Talkspace, a telehealth provider. Management has indicated the deal is accretive to earnings, and UBS incorporated the transaction into its updated financial model. UHS also secured a $400 million delayed-draw term loan facility, prompting the bank to adjust its interest expense projections higher due to increased leverage.
Second-quarter results showed revenue of $4.64 billion, exceeding Wall Street’s estimate of $4.58 billion. Adjusted earnings per share, however, came in at $5.35, below the expected $5.95, as the company set aside higher liability reserves and faced challenges in new units.
Credit ratings firm S&P Global Ratings revised its outlook for UHS from stable to positive, citing potential improvements in operational performance. Guggenheim maintained its buy rating but lowered its price target, while Morgan Stanley reduced its target and kept its “neutral weight” rating on the stock.
