Select Medical Holdings Corporation’s SEM stock gained 13.8% since it reported third-quarter 2024 results on Oct. 31, 2024. Upward revision in revenues and adjusted EBITDA outlook might have buoyed investors’ confidence in the stock. The third-quarter results benefited on the back of growth in patient days and revenue per patient day at the Critical Illness Recovery Hospital and Rehabilitation Hospital.

SEM reported third-quarter 2024 adjusted earnings per share (EPS) of 50 cents, which surpassed the Zacks Consensus Estimate by 38.9%. The bottom line rose 8.7% year over year.

Net operating revenues amounted to $1.76 billion, which improved 5.4% year over year. The metric beat the consensus mark by 2.3%.

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Select Medical Holdings Corporation Price, Consensus and EPS Surprise

Select Medical Holdings Corporation price-consensus-eps-surprise-chart | Select Medical Holdings Corporation Quote

Q3 Performance

Total costs and expenses increased 5.5% year over year to $1.54 billion in the quarter under review, lower than our estimate of $1.59 billion. The increase was due to escalating costs of services, exclusive of depreciation and amortization, and rising general and administrative expenses.

Adjusted EBITDA of $205.5 million rose 6% year over year and outpaced our estimate of $190.3 million.

Segmental Update

Critical Illness Recovery Hospital

The segment's revenues amounted to $583 million in the third quarter, which increased 3.4% year over year but missed the consensus mark and our estimate of $623.3 million. The unit benefited from a 2.4% year-over-year increase in revenue per patient day. Patient days improved 1.1%, while admissions declined 0.7% year over year. The occupancy rate improved 1.6% year over year.

Adjusted EBITDA of $50.8 million climbed 9.5% year over year but missed the Zacks Consensus Estimate and our estimate of $53.2 million. Adjusted EBITDA margin improved 50 basis points (bps) year over year to 8.7%.

Rehabilitation Hospital

The segment’s revenues improved 14.4% year over year to $282.7 million in the quarter under review. The figure outpaced the consensus mark of $251.3 million. Year-over-year increases of 7.6% and 4.2%, respectively, in admissions and patient days contributed to the strong performance of the unit.

Adjusted EBITDA of $60.1 million rose 12.1% year over year and beat the Zacks Consensus Estimate of $57.5 million. Adjusted EBITDA margin deteriorated 40 bps year over year to 21.3%.

Outpatient Rehabilitation

Revenues amounted to $312 million in the segment, which grew 6.9% year over year in the third quarter and beat the consensus mark of $293.4 million. The improvement can be attributed to a 5.6% rise in patient visits. Revenue per patient visit inched up 1% year over year.

Adjusted EBITDA of $28.3 million improved 7.5% year over year and beat the Zacks Consensus Estimate and our estimate of $20.1 million. Adjusted EBITDA margin improved 10 bps year over year to 9.1%.

Concentra

The segment reported revenues of $489.6 million, which increased 3.3% year over year and beat the consensus mark and our estimate of $460 million. A year-over-year decline of 0.7% in visits was offset by 3.7% growth in revenue per visit, benefiting the unit’s results.

Adjusted EBITDA improved 2.7% year over year to $101.6 million in the quarter under review and surpassed the Zacks Consensus Estimate of $85.3 million. Adjusted EBITDA margin of 20.7% deteriorated 20 bps year over year.

Financial Position (as of Sept. 30, 2024)

Select Medical exited the third quarter with cash and cash equivalents of $191.5 million, which rose from $84 million at 2023-end. It had $496.6 million left under its revolving facility as of Sept. 30, 2024.

Total assets of $8 billion rose from $7.7 billion at 2023-end.

Long-term debt, net of the current portion, amounted to $3.1 billion, down from the figure at 2023-end.

Total equity of $2.3 billion rose from $1.5 billion at 2023-end.

Select Medical generated cash flow from operations of $181 million in the reported quarter, which rose 55.5% year over year.

Share Repurchase & Dividend Update

Select Medical did not buy back shares in the third quarter of 2024 under the $1 billion authorized share repurchase program, which is set to expire on Dec. 31, 2025.

On Oct. 30, 2024, management approved a cash dividend of 12.5 cents per share, which will be paid out on Nov. 26, to shareholders of record as of Nov. 13.

2024 Outlook Revised

Management increased its previous revenue guidance between $6.95 billion and $7.15 billion, the mid-point of which suggests 5.2% growth from the 2023 reported figure of $6.7 billion.

Management expects its adjusted EBITDA between $865 million and $885 million for 2024, the mid-point of which implies an 8.4% rise from the 2023 reported figure of $807.4 million.

Capital expenditures are expected to be between $200 and $250 million in 2024.

EPS is expected to be between $2.01 and $2.12, the mid-point of which indicates an improvement of 8.1% from the 2023 reported figure of $1.91.

Zacks Rank

Select Medical currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Medical Sector Releases

Of the Medical sector players that have reported third-quarter 2024 results so far, the bottom-line results of Centene Corporation CNC, The Cigna Group CI and HCA Healthcare, Inc. HCA beat the respective Zacks Consensus Estimate.

Centene reported third-quarter 2024 adjusted EPS of $1.62, which outpaced the Zacks Consensus Estimate by 16.6%. However, the bottom line fell 19% year over year. Revenues were $42 billion, which advanced 10.5% year over year. The top line surpassed the consensus mark by 10.9%. Revenues from Medicaid dipped 1% year over year to $21.3 billion, while Medicare revenues grew 4% year over year to $5.6 billion. Additionally, commercial revenues of $8.7 billion climbed 35% year over year.

Premiums of Centene amounted to $36.1 billion, which advanced 6.6% year over year. Service revenues dropped 28.8% year over year to $784 million. Investment and other income of $432 million more than doubled year over year. As of Sept. 30, 2024, total membership was 28.6 million, which grew 2.4% year over year. Adjusted net earnings of $849 million tumbled 21.5% year over year. 

Cigna’s third-quarter adjusted EPS of $7.51 beat the Zacks Consensus Estimate by 4%. The bottom line improved 10.9% year over year. Adjusted revenues were $63.7 billion, which climbed 29.8% year over year. The top line outpaced the consensus mark by 6.5%. CI’s medical customer base was 19 million as of Sept. 30, 2024, which slipped 2.9% year over year. Adjusted income from operations grew 5% year over year to $2.1 billion. 

The Evernorth unit recorded adjusted revenues of $52.6 billion, which surged 36% year over year. Adjusted operating income, on a pre-tax basis, advanced 9% year over year to $1.88 billion. However, the adjusted pre-tax margin of 3.6% deteriorated 80 bps year over year. The Cigna Healthcare unit’s adjusted revenues were $13.2 billion, which grew 3% year over year. The unit’s pre-tax adjusted operating income decreased 4% year over year to $1.17 billion. Medical care ratio deteriorated 230 bps year over year to 82.8% at the third-quarter end. 

HCA Healthcare reported third-quarter adjusted EPS of $5.05, which beat the Zacks Consensus Estimate by 1.6%. The bottom line improved 29.2% year over year. Revenues amounted to $17.5 billion, which improved 7.9% year over year . However, the top line missed the consensus mark by a whisker. Same-facility equivalent admissions increased 4.5% year over year, while same-facility admissions grew 4.5% year over year. 

Same-facility equivalent admissions beat the consensus mark by 1.3%. Same-facility revenue per equivalent admission rose 2.5% year over year. Same-facility inpatient surgeries grew 1.6% year over year. Same-facility outpatient surgeries declined 2% year over year. Additionally, same-facility emergency room visits rose 4.6% year over year. Adjusted EBITDA improved 13.4% year over year to $3.3 billion.

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