Select Medical (SEM) Down 5.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Select Medical (SEM). Shares have lost about 5.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Select Medical due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Select Medical Q1 Earnings Beat Estimates, Rise Y/Y

Select Medical’s first-quarter earnings of 37 cents per share beat the Zacks Consensus Estimate by 12% and improved 37% year over year as well.

Net operating revenues increased 6.8% year over year to $1.41 billion on the back of higher contribution from its segments, namely Critical Illness Recovery Hospital, Rehabilitation Hospital and Outpatient Rehabilitation.   The top line also beat the Zacks Consensus Estimate by 2.1%.

Total cost and expenses rose 6.4% to $1.23 billion due to escalated cost of services, and general and administrative expenses. Adjusted EBITDA grew 10.1% year over year to $187.3 million.

Critical Illness Recovery Hospital

Operating revenues increased 9.4% to $500.5 million. This upside can be attributed to growth in patient volumes and patient days. Adjusted EBITDA jumped 21.3% to $88.6 million.

Rehabilitation Hospital Segment

Operating revenues were up 17.8% to $182 million, led by expanded patient volumes and revenue per patient day. Adjusted EBITDA soared 49.5% to $38.6 million.

Outpatient Rehabilitation

Operating revenues increased 3.4% to $255.2 million, led by growth in the number of visits. Adjusted EBITDA decreased 6.5% to $27.1 million

Concentra

Operating revenues inched up 0.6% year over year to $398.5 million. Adjusted EBITDA declined 7.2% to $61.5 million.

Balance Sheet Position

At the end of the first quarter, the company had $3.55 billion of debt outstanding, up 3.9% from the level at 2019 end.

Total equity of $974.8 million increased 4.9% from the level on Dec 31, 2019.

Total cash in hand of $73.2 million was down 78% from the level as of Dec 31, 2019.

Cash flow from operations during the quarter was $44.1 million, up 5.6% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -160% due to these changes.

VGM Scores

Currently, Select Medical has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Select Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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