Outpatient & Specialty Care Q3 Earnings: Select Medical (NYSE:SEM) is the Best in the Biz

Wrapping up Q3 earnings, we look at the numbers and key takeaways for the outpatient & specialty care stocks, including Select Medical (NYSE:SEM) and its peers.

The outpatient and specialty care industry delivers targeted medical services in non-hospital settings that are often cost-effective compared to inpatient alternatives. This means that they are more desired as rising healthcare costs and ways to combat them become more and more top-of-mind. Outpatient and specialty care providers boast revenue streams that are stable due to the recurring nature of treatment for chronic conditions and long-term patient relationships. However, their reliance on government reimbursement programs like Medicare means stroke-of-the-pen risk. Additionally, scaling a network of facilities can be capital-intensive with uneven return profiles amid competition from integrated healthcare systems. Looking ahead, the industry is positioned to grow as demand for outpatient services expands, driven by aging populations, a rising prevalence of chronic diseases, and a shift toward value-based care models. Tailwinds include advancements in medical technology that support more complex procedures in outpatient settings and the increasing focus on preventive care, which can be aided by data and AI. However, headwinds such as reimbursement rate cuts, labor shortages, and the financial strain of digitization may temper growth.

The 7 outpatient & specialty care stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was in line.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 11.3% since the latest earnings results.

Best Q3: Select Medical (NYSE:SEM)

With a nationwide network spanning 46 states and over 2,700 healthcare facilities, Select Medical (NYSE:SEM) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States.

Select Medical reported revenues of $1.36 billion, up 7.2% year on year. This print exceeded analysts’ expectations by 2.7%. Overall, it was a strong quarter for the company with a beat of analysts’ EPS and revenue estimates.

Select Medical pulled off the biggest analyst estimates beat of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 9.6% since reporting and currently trades at $12.84.

Is now the time to buy Select Medical? Access our full analysis of the earnings results here, it’s free for active Edge members.

U.S. Physical Therapy (NYSE:USPH)

With a nationwide footprint spanning 671 clinics across 42 states, U.S. Physical Therapy (NYSE:USPH) operates a network of outpatient physical therapy clinics and provides industrial injury prevention services to employers across the United States.

U.S. Physical Therapy reported revenues of $197.1 million, up 17.3% year on year, outperforming analysts’ expectations by 1%. The business had a satisfactory quarter with a narrow beat of analysts’ revenue estimates.

U.S. Physical Therapy pulled off the fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 22.4% since reporting. It currently trades at $68.31.

Is now the time to buy U.S. Physical Therapy? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: DaVita (NYSE:DVA)

With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE:DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.

DaVita reported revenues of $3.42 billion, up 4.8% year on year, in line with analysts’ expectations. It was a slower quarter as it posted a significant miss of analysts’ EPS estimates and revenue in line with analysts’ estimates.

DaVita delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 9.1% since the results and currently trades at $115.07.

Read our full analysis of DaVita’s results here.

agilon health (NYSE:AGL)

Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE:AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.

agilon health reported revenues of $1.44 billion, down 1.1% year on year. This print surpassed analysts’ expectations by 1%. However, it was a slower quarter as it logged full-year EBITDA guidance missing analysts’ expectations significantly and a significant miss of analysts’ EPS estimates.

agilon health had the slowest revenue growth among its peers. The company added 5,000 customers to reach a total of 503,000. The stock is down 28.8% since reporting and currently trades at $0.52.

Read our full, actionable report on agilon health here, it’s free for active Edge members.

Surgery Partners (NASDAQ:SGRY)

With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ:SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.

Surgery Partners reported revenues of $821.5 million, up 6.6% year on year. This number met analysts’ expectations. Aside from that, it was a slower quarter as it produced a significant miss of analysts’ EPS estimates and full-year revenue guidance missing analysts’ expectations.

Surgery Partners had the weakest full-year guidance update among its peers. The stock is down 27.2% since reporting and currently trades at $15.79.

Read our full, actionable report on Surgery Partners here, it’s free for active Edge members.

Market Update

As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.

Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.