Select Medical Holdings Corporation (SEM) reported fourth-quarter 2013 net operating earnings of 21 cents a share, beating the Zacks Consensus Estimate of 20 cents per share by a penny. However, the number tumbled 25% year over year.
The decline in the bottom line was attributable to higher expenses incurred in the quarter.
The fourth-quarter net income of the company was 23 cents, down 23.3% from the prior-year quarter number.
Operational Activities
Operating revenues grossed $746.2 million during the quarter, up 0.7% year over year. The upside, though marginal, owed to changes in Medicare. The result also significantly surpassed the Zacks Consensus Estimate of $239 million.
Total expenses amounted to $677.9 million, up 2.7% year over year. The increase was primarily attributable to higher cost of services (up 1.2% year over year) and general and administrative expenses (up 46.5%).
The total adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of Select Medical for the fourth quarter amounted to $86.4 million, down 12.6% year over year.
Segment Update
Specialty Hospitals: Operating revenues at the segment stood at $548.4 million in the fourth quarter, sliding 1.4% year over year due to reduction of sequestration.
Adjusted EBITDA were $88.8 million compared with $95.6 million in the fourth quarter of 2012.
Number of patient admissions increased 1.8% year over year to 13,989 during the quarter.
Outpatient Rehabilitation: Operating revenues at this segment grossed $197.8 million, up 6.8% year over year driven by a higher number of clinics. Number of visits at clinics under this segment also increased 7.4% year over year.
Adjusted EBITDA also increased by 7.3% year over year and totaled $19.8 million.
Full-Year Highlights
Select Medical reported 2013 net operating earnings of 82 cents a share. The number slid 21.9% from the 2012 equivalent.
Net income for 2013 came in at 90 cents a share, declining 18.2% year over year.
Operating revenues for the year increased 0.9% from the 2012 level to $2.97 billion.
Share Repurchase Update
As part of its $350 million share repurchase authorization, Select Medical repurchased 1.1 million shares for a total cost of nearly $10 million in 2013. On Feb 19, 2014, the board of Select Medical expanded the validity of its current repurchase authorization, which will now expire on Mar 31, 2015.
Financial Update
Total cash balance of Select Medical as of the fourth-quarter end stood at $4.3 million, plunging from $40.1 million as of 2012-end.
Long-term debt as of Dec 31, 2013 dropped to $1.43 billion from $1.46 billion at the end of 2012.
Cash flow from operations declined 35.5% year over year to $192.5 million in 2013.
2014 Outlook
Select Medical expects its 2014 operating earnings to grow from the 2013 number and range between 84 cents and 93 cents a share.
Select Medical also reiterated its previously provided guidance of operating revenues from $3.05 to $3.15 billion, representing decent growth from $2.97 billion reported in 2013. Also, adjusted EBITDA is expected to hover between $365 million and $385 million.
Zacks Rank
Select Medical presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include Almost Family Inc. (AFAM), Chemed Corp. (CHE) and Aetna Inc. (AET). While Almost Family and Chemed sport a Zacks Rank #1 (Strong Buy), Aetna carries a Zacks Rank #2 (Buy).
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