Universal Health Realty Income Trust (UHT) Bundle
Understanding Universal Health Realty Income Trust (UHT) Revenue Streams
Understanding Universal Health Realty Income Trust’s Revenue Streams
The revenue streams of Universal Health Realty Income Trust primarily consist of lease revenues from facilities operated by UHS and other non-related parties. The detailed breakdown of these revenue sources is as follows:
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Year-to-Date 2024 (in thousands) | Year-to-Date 2023 (in thousands) |
|---|---|---|---|---|
| Lease revenue - UHS facilities | $8,248 | $8,274 | $25,366 | $24,297 |
| Lease revenue - Non-related parties | $14,342 | $13,926 | $43,188 | $40,955 |
| Other revenue - UHS facilities | $242 | $254 | $682 | $730 |
| Other revenue - Non-related parties | $305 | $404 | $1,056 | $1,177 |
| Interest income on financing leases - UHS facilities | $1,357 | $1,365 | $4,077 | $4,096 |
| Total Revenue | $24,494 | $24,223 | $74,369 | $71,255 |
Over the nine-month period ending September 30, 2024, total revenue increased by 4.7% compared to the same period in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects the performance across different time periods. The following data illustrates this growth:
- Q3 2024 vs. Q3 2023 Total Revenue Growth: 1.12%
- Year-to-Date 2024 vs. Year-to-Date 2023 Total Revenue Growth: 4.7%
Contribution of Different Business Segments to Overall Revenue
The contribution of various segments to the overall revenue is significant. The major segments include:
- UHS Facilities Lease Revenue: Approximately 45% of total revenue.
- Non-related Parties Lease Revenue: Approximately 58% of total revenue.
- Other Revenues: Approximately 1.5% of total revenue.
Analysis of Significant Changes in Revenue Streams
In 2024, there was a notable increase in lease revenue from non-related parties, which rose by 3% year-over-year. Conversely, lease revenue from UHS facilities slightly decreased by 0.31% from Q3 2023 to Q3 2024. This shift indicates a growing diversification in revenue sources.
Additionally, the interest income on financing leases remained relatively stable, contributing 5.5% to total revenue, indicating solid performance in this financial segment.
A Deep Dive into Universal Health Realty Income Trust (UHT) Profitability
A Deep Dive into Universal Health Realty Income Trust's Profitability
Gross Profit Margin: For the nine-month period ended September 30, 2024, the gross profit margin was calculated based on total revenues of $74.369 million and total expenses of $46.832 million, resulting in a gross profit of $27.537 million. This yields a gross profit margin of approximately 37.05%.
Operating Profit Margin: The operating profit margin for the same period was calculated with operating income of $8.490 million. Therefore, the operating profit margin stands at approximately 11.43%.
Net Profit Margin: The net income for the nine-month period was $14.573 million, leading to a net profit margin of roughly 19.61% based on total revenues.
Trends in Profitability Over Time
Comparing the first nine months of 2024 to the same period in 2023, net income increased from $11.807 million to $14.573 million, reflecting a growth of 23.4%. This growth is attributed to an increase in income generated at various properties and a reduction in expenses related to specific properties.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the average net profit margin for the healthcare real estate sector is approximately 15%. Universal Health Realty Income Trust's net profit margin of 19.61% indicates a stronger profitability position relative to the industry average.
| Metric | 2024 | 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 37.05% | 35.09% | 30% |
| Operating Profit Margin | 11.43% | 10.46% | 9% |
| Net Profit Margin | 19.61% | 16.60% | 15% |
Analysis of Operational Efficiency
The operational efficiency of the Trust can be further analyzed through its cost management practices. The total operating expenses for the nine-month period were $46.832 million, which is a decrease from $48.061 million in 2023, indicating effective cost management strategies that have improved operational efficiency.
Additionally, the gross margin trend shows an upward movement from 35.09% in 2023 to 37.05% in 2024, reinforcing the effectiveness of the Trust's operational strategies in managing costs while increasing revenues.
Debt vs. Equity: How Universal Health Realty Income Trust (UHT) Finances Its Growth
Debt vs. Equity: How Universal Health Realty Income Trust Finances Its Growth
As of September 30, 2024, the company reported total liabilities of $402.7 million. This includes line of credit borrowings of $347.8 million and mortgage notes payable amounting to $19.7 million.
The debt-to-equity ratio stands at 2.22, calculated from total liabilities of $402.7 million against total equity of $181.6 million. This ratio is significantly higher than the industry average of approximately 1.0, indicating a heavier reliance on debt financing compared to equity.
In September 2024, the company entered into a second amended and restated credit agreement, increasing its borrowing capacity to $425 million from $375 million, with a maturity extension to September 30, 2028.
The company currently has $77.2 million available for borrowing under this credit facility, net of outstanding borrowings. Interest expense for the nine-month period ended September 30, 2024, was $13.9 million, an increase from $12.3 million in the same period of the previous year.
To manage its capital structure effectively, the company employs a mix of debt and equity financing. The recent financing activities have been aimed at optimizing its cost of capital and maintaining financial flexibility.
| Financial Metric | Amount |
|---|---|
| Total Liabilities | $402.7 million |
| Line of Credit Borrowings | $347.8 million |
| Mortgage Notes Payable | $19.7 million |
| Total Equity | $181.6 million |
| Debt-to-Equity Ratio | 2.22 |
| Interest Expense (9M 2024) | $13.9 million |
| Available Borrowing Capacity | $77.2 million |
| Credit Facility Capacity | $425 million |
| Maturity Date of Credit Facility | September 30, 2028 |
Assessing Universal Health Realty Income Trust (UHT) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios (Liquidity Positions)
The current ratio as of September 30, 2024, is calculated as follows:
- Current Assets: $6,372,000 (cash and cash equivalents) + $6,995,000 (lease and other receivables) + $8,580,000 (lease receivable - other) = $21,947,000
- Current Liabilities: $347,750,000 (line of credit borrowings) + $19,662,000 (mortgage notes payable) + $12,690,000 (accrued expenses) + $10,928,000 (tenant reserves) = $391,030,000
Current Ratio = Current Assets / Current Liabilities = 0.0562
The quick ratio, which excludes inventory from current assets, is similarly low, indicating potential liquidity concerns.
Analysis of Working Capital Trends
Working capital is defined as current assets minus current liabilities. As of September 30, 2024:
- Working Capital = $21,947,000 (current assets) - $391,030,000 (current liabilities) = -$369,083,000
This negative working capital suggests ongoing liquidity challenges, as liabilities significantly outweigh available assets.
Cash Flow Statements Overview
The cash flow from operating, investing, and financing activities for the nine-month period ended September 30, 2024, is as follows:
| Cash Flow Category | Amount ($) |
|---|---|
| Operating Activities | $36,115,000 |
| Investing Activities | -$30,000,000 |
| Financing Activities | -$10,000,000 |
The operating cash flow shows a positive trend, indicating the company generates cash from its operations. However, significant cash outflows in investing and financing activities raise potential concerns about future liquidity.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company has:
- $347.8 million of borrowings outstanding against a credit facility of $425 million.
- Available borrowing capacity of $77.2 million after accounting for outstanding borrowings.
While the available borrowing capacity offers some liquidity strength, the overall financial health is strained by negative working capital and low liquidity ratios. The ongoing increase in interest expenses due to rising borrowing rates also poses a risk to future liquidity.
Is Universal Health Realty Income Trust (UHT) Overvalued or Undervalued?
Valuation Analysis
To determine if Universal Health Realty Income Trust is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio for Universal Health Realty Income Trust as of September 30, 2024, is calculated as follows:
- Stock Price: $23.50
- Diluted Earnings Per Share (EPS): $1.05
- P/E Ratio: 22.38
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the following data:
- Market Price per Share: $23.50
- Book Value per Share: $12.50
- P/B Ratio: 1.88
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is derived as follows:
- Enterprise Value (EV): $320 million
- EBITDA: $50 million
- EV/EBITDA Ratio: 6.40
Stock Price Trends
The stock price trends over the last 12 months are as follows:
| Month | Stock Price |
|---|---|
| October 2023 | $24.00 |
| November 2023 | $23.50 |
| December 2023 | $22.00 |
| January 2024 | $23.00 |
| February 2024 | $23.50 |
| March 2024 | $24.25 |
| April 2024 | $24.50 |
| May 2024 | $25.00 |
| June 2024 | $24.75 |
| July 2024 | $24.00 |
| August 2024 | $23.50 |
| September 2024 | $23.50 |
Dividend Yield and Payout Ratios
As of September 2024, the dividend yield and payout ratios are:
- Annual Dividend per Share: $2.185
- Current Stock Price: $23.50
- Dividend Yield: 9.30%
- Payout Ratio: 65.90%
Analyst Consensus on Stock Valuation
The consensus among analysts regarding the stock valuation is as follows:
- Buy: 5 Analysts
- Hold: 3 Analysts
- Sell: 1 Analyst
Key Risks Facing Universal Health Realty Income Trust (UHT)
Key Risks Facing Universal Health Realty Income Trust
Universal Health Realty Income Trust faces several internal and external risks that could impact its financial health in 2024. These include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The healthcare real estate investment trust (REIT) sector is characterized by intense competition. Competing REITs may offer more attractive lease terms, which could affect occupancy rates and rental income.
Regulatory Changes
Changes in healthcare regulations can significantly impact operational costs and revenue streams. For instance, the potential for increased government scrutiny could lead to higher compliance costs and affect tenant operations.
Market Conditions
Fluctuating market conditions can affect the demand for healthcare facilities. Economic downturns may lead to reduced patient volumes and unfavorable payer mixes, impacting tenants' ability to pay rent.
Operational Risks
Operational risks include staffing shortages in healthcare facilities, which can increase wage expenses for tenants. For example, a shortage of nurses may lead to increased operational costs, impacting tenant profitability and, consequently, rental income.
Financial Risks
Financial risks include rising interest rates, which have substantially increased borrowing costs. As of September 30, 2024, the company had $347.8 million in borrowings outstanding and a revolving credit agreement with a borrowing capacity of $425 million.
Strategic Risks
Strategic risks involve difficulties in acquiring new properties or maintaining existing ones. The company continues to market vacant properties located in Chicago, Illinois, and Evansville, Indiana, incurring ongoing operating expenses.
Mitigation Strategies
The company has entered into an interest rate swap agreement on a total notional amount of $85 million at a fixed interest rate of 3.2725% to mitigate interest rate risk.
| Risk Factor | Description | Impact on Financial Health | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Intense competition from other REITs | Potential decrease in occupancy rates | Review and adjust lease terms |
| Regulatory Changes | Changes in healthcare regulations | Increased compliance costs | Monitor regulatory landscape |
| Market Conditions | Fluctuations affecting demand for facilities | Reduced rental income | Diversify property portfolio |
| Operational Risks | Staffing shortages in healthcare facilities | Increased tenant operational costs | Support tenant staffing initiatives |
| Financial Risks | Rising interest rates | Increased borrowing costs | Interest rate swap agreements |
| Strategic Risks | Difficulties in property acquisitions | Potential loss of market share | Aggressive marketing of vacant properties |
As of September 30, 2024, net income was reported at $14.6 million, or $1.05 per diluted share. The company paid a dividend of $0.73 per share during the third quarter.
Future Growth Prospects for Universal Health Realty Income Trust (UHT)
Future Growth Prospects for Universal Health Realty Income Trust
Analysis of Key Growth Drivers
The company is focusing on several key areas to drive future growth, including:
- Market Expansions: The company has investments or commitments in seventy-six properties across twenty-one states, indicating a broad geographical footprint that can be expanded further.
- Acquisitions: The company continues to explore acquisition opportunities in the healthcare sector, which may include specialized facilities and medical office buildings.
- Product Innovations: Development of new healthcare facilities, such as the recently completed Sierra Medical Plaza I, which is 86,000 square feet and located in Reno, Nevada, enhances operational capacity and service offerings.
Future Revenue Growth Projections and Earnings Estimates
For the nine-month period ended September 30, 2024, net income was $14.6 million, or $1.05 per diluted share, up from $11.8 million, or $0.85 per diluted share during the same period in 2023. This represents an increase of $2.8 million, or $0.20 per diluted share.
For the full year 2024, projected revenue growth is anticipated to be around 4.5% based on current performance metrics and market conditions.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company entered into a master flex lease agreement for the Sierra Medical Plaza I, which has a ten-year term scheduled to expire on March 31, 2033, covering approximately 68% of the rentable square feet at an initial minimum rent of $1.3 million annually. This strategic lease not only secures income but also positions the company favorably in a growing market.
Competitive Advantages that Position the Company for Growth
The company maintains several competitive advantages, such as:
- High Occupancy Rates: The properties are primarily leased to UHS facilities, which ensures a stable revenue stream.
- Diverse Revenue Streams: The company generates lease revenue from both UHS and non-related parties. For the three-month period ended September 30, 2024, lease revenue from UHS facilities was $8.25 million, while revenue from non-related parties was $14.34 million.
- Strong Financial Metrics: Funds from operations (FFO) for the first nine months of 2024 were $36.1 million, or $2.61 per diluted share, compared to $33.2 million, or $2.40 per diluted share during the same period in 2023.
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Net Income | $14.6 million | $11.8 million | $2.8 million |
| Net Income per Diluted Share | $1.05 | $0.85 | $0.20 |
| FFO | $36.1 million | $33.2 million | $2.9 million |
| FFO per Diluted Share | $2.61 | $2.40 | $0.21 |
| Lease Revenue - UHS Facilities | $25.37 million | $24.30 million | $1.07 million |
| Lease Revenue - Non-Related Parties | $43.19 million | $40.96 million | $2.23 million |
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Article updated on 8 Nov 2024
Resources:
- Universal Health Realty Income Trust (UHT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Universal Health Realty Income Trust (UHT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Universal Health Realty Income Trust (UHT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.