Universal Health tailwinds could create a ‘multi-year growth story’ – BofA

BofA upgraded Universal Health (NYSE:) to Buy from Neutral, with a $163 price target in a note Friday, with analysts saying they are optimistic about the combination of strong markets and a positive hospital macro backdrop.

“The combination of strong markets and a positive hospital macro backdrop (repricing, improving vols, moderating labor) gives us visibility into margins normalizing over time and creating a multi-year growth story,” the analysts wrote.

The firm sees significant embedded earnings power from Acute Care normalization/repricing while they wait for the behavioral business to reaccelerate.

“Getting back to pre-COVID EBITDA margins implies a $600m+ (37%) opportunity for UHS vs 2023. UHS currently trades around 8x (near the midpoint of the 6-9x range over the past five years) but if margins and behavioral growth normalize there could also be upside to the multiple,” said the analysts.