Core Insights - Select Medical (SEM) reported quarterly earnings of $0.23 per share, exceeding the Zacks Consensus Estimate of $0.18 per share, but down from $0.5 per share a year ago, representing an earnings surprise of +27.78% [1] - The company posted revenues of $1.36 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.87%, but down from $1.76 billion year-over-year [2] - Select Medical shares have declined approximately 24.2% year-to-date, contrasting with the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.26 on revenues of $1.36 billion, and for the current fiscal year, it is $1.18 on revenues of $5.38 billion [7] - The estimate revisions trend for Select Medical was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Medical - HMOs industry, to which Select Medical belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Humana (HUM), another company in the same industry, is expected to report quarterly earnings of $2.91 per share, reflecting a year-over-year decline of -30.1%, with revenues anticipated to be $31.98 billion, up 9.1% from the previous year [9][10]

Revenue Performance - Revenue for Q3 2025 increased 7.2% to $1,363.4 million compared to $1,271.6 million in Q3 2024[3] - For the nine months ended September 30, 2025, revenue increased 4.7% to $4,056.2 million compared to $3,874.5 million in the same period of 2024[4] - The rehabilitation hospital segment saw a revenue increase of 16.2% to $328.6 million in Q3 2025 compared to $282.7 million in Q3 2024[9] - The outpatient rehabilitation segment's revenue increased 3.2% to $960.3 million for the nine months ended September 30, 2025, compared to $930.7 million in the same period of 2024[12] - Total revenue for Q3 2025 increased to $609,929, a 4.6% rise from $582,950 in Q3 2024[33] - Total revenue for the nine months ended September 30, 2025 was $1,848,098, a slight increase of 0.2% from $1,843,751 in 2024[34] Income and Earnings - Income from continuing operations before other income and expense rose 32.9% to $73.0 million for Q3 2025, up from $54.9 million in Q3 2024[3] - Net income attributable to Select Medical decreased by 48.2% to $28,793 in Q3 2025 from $55,628 in Q3 2024[24] - Income from continuing operations before income taxes rose by 22.5% to $55,929 in Q3 2025, up from $45,650 in Q3 2024[24] - Earnings per share for continuing operations increased to $0.23 in Q3 2025 from $0.19 in Q3 2024[29] - Net income for Q3 2025 decreased to $44,180, down 45.5% from $81,015 in Q3 2024[31] - Adjusted income from continuing operations, net of tax, attributable to common shares for Q3 2024 was $32,151,000, compared to $28,087,000 in Q3 2025, reflecting a decrease of 12.5%[42] Adjusted EBITDA - Adjusted EBITDA for Q3 2025 increased 7.5% to $111.7 million compared to $103.9 million in Q3 2024[3] - Adjusted EBITDA for Q3 2025 rose to $56,102, reflecting a 10.5% increase compared to $50,763 in Q3 2024[33] - The Adjusted EBITDA margin for the critical illness recovery hospital segment was 10.8% for the nine months ended September 30, 2025, down from 12.9% in the same period of 2024[8] - Select Medical's rehabilitation hospital segment generated $60,117,000 in Adjusted EBITDA for Q3 2024, increasing to $67,956,000 in Q3 2025, a growth of 13.0%[38] - Full year 2025 Adjusted EBITDA is projected to range between $510,000,000 and $530,000,000[46] Cash Flow and Expenses - Cash provided by operating activities for the nine months ended September 30, 2025 was $282,142, down 28.2% from $392,432 in the same period of 2024[32] - General and administrative expenses decreased by 25.4% to $108,721 for the nine months ended September 30, 2025, compared to $145,672 in 2024[26] - Cash paid for interest during the nine months ended September 30, 2025 was $84,002, down 61.2% from $216,757 in 2024[32] - Interest expense for Q3 2024 was $31,379,000, slightly decreasing to $30,021,000 in Q3 2025[38] Shareholder Returns and Stock Activity - The Board of Directors declared a cash dividend of $0.0625 per share, payable on or about November 25, 2025[13] - Select Medical repurchased 6,375,512 shares at a cost of approximately $96.5 million during the nine months ended September 30, 2025[16] Balance Sheet - Total assets increased to $5,685,723 as of September 30, 2025, compared to $5,607,951 at the end of 2024[30] - Total liabilities rose to $3,665,867 as of September 30, 2025, up from $3,610,856 at the end of 2024[30] Operational Metrics - Number of hospitals operated at the end of Q3 2025 was 105, a decrease from 106 in Q3 2024[33] - Revenue per patient day for Q3 2025 increased to $2,287, a 6.6% increase from $2,145 in Q3 2024[33] - Number of admissions in Q3 2025 increased to 8,859, a 2.1% rise from 8,676 in Q3 2024[33] - The number of patients admitted to Select Medical's hospitals during the periods presented is a critical metric for assessing operational performance[35] - The occupancy rate of hospitals is calculated using the number of patient days divided by total bed days available, indicating utilization levels[35] - Average revenue per patient day for the periods presented is calculated by dividing patient service revenues by total patient days, highlighting operational efficiency[35] Tax and Debt - Income tax expense from continuing operations increased by 168.6% to $11,749 in Q3 2025 from $4,374 in Q3 2024[24] - The company reported a loss on early retirement of debt amounting to $10,939 in both the three and nine months ended September 30, 2024[26] - The company reported a loss on early retirement of debt amounting to $10,939,000 for the nine months ended September 30, 2024[38]

Revenue Performance - The company reported revenue of $4,056.2 million for the nine months ended September 30, 2025, with approximately 46% from the critical illness recovery hospital segment, 23% from the rehabilitation hospital segment, and 24% from the outpatient rehabilitation segment[78]. - Total revenue for the nine months ended September 30, 2025, was $4,056.2 million, a 4.7% increase compared to $3,874.5 million for the same period in 2024[86]. - Revenue for the three months ended September 30, 2025, was $1,363.4 million, a 7.2% increase from $1,271.6 million in the same period of 2024[121]. - Revenue from the Critical Illness Recovery Hospital segment increased by 0.2%, while the Rehabilitation Hospital segment saw a 16.4% increase[87]. - Critical Illness Recovery Hospital segment revenue increased 4.6% to $609.9 million for the three months ended September 30, 2025, driven by a 6.6% increase in revenue per patient day to $2,287[122]. - Rehabilitation Hospital segment revenue rose 16.2% to $328.6 million, with patient days increasing 11.1% to 129,787 for the three months ended September 30, 2025[123]. - Outpatient Rehabilitation segment revenue increased 4.3% to $325.4 million, with patient visits up 5.5% to 2,924,794 for the three months ended September 30, 2025[124]. - Revenue for the Rehabilitation Hospital Segment increased by 16.4% to $949.8 million for the nine months ended September 30, 2025, compared to $816.2 million for the same period in 2024[139]. - Revenue for the Outpatient Rehabilitation Segment increased by 3.2% to $960.3 million for the nine months ended September 30, 2025, compared to $930.7 million for the same period in 2024[140]. Income and Profitability - For the three months ended September 30, 2025, income from continuing operations, net of tax, was $44.2 million, compared to $41.3 million for the same period in 2024, representing a growth of 7.0%[84]. - Income from continuing operations, net of tax, was $176.8 million for the nine months ended September 30, 2025, compared to $140.4 million for the same period in 2024[86]. - The company experienced a 10.1% increase in total income from continuing operations before other income and expenses[87]. - Net income for the three months ended September 30, 2025, was $43.6 million, down from $80.0 million in the same period of 2024[121]. Adjusted EBITDA - Adjusted EBITDA for the three months ended September 30, 2025, was $111.7 million, an increase of 7.5% compared to $103.9 million for the same period in 2024[84]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $388.5 million, with an adjusted EBITDA margin of 9.6%[86]. - Adjusted EBITDA for the Critical Illness Recovery Hospital Segment increased by 10.5% to $56.1 million for the three months ended September 30, 2025, compared to $50.8 million for the same period in 2024[127]. - Adjusted EBITDA for the Rehabilitation Hospital Segment increased by 13.0% to $68.0 million for the three months ended September 30, 2025, compared to $60.1 million for the same period in 2024[128]. - Adjusted EBITDA for the Outpatient Rehabilitation Segment decreased to $24.2 million for the three months ended September 30, 2025, down from $28.3 million for the same period in 2024[129]. - The Adjusted EBITDA margin for the total operations was 8.2% for the three months ended September 30, 2025[84]. - Adjusted EBITDA margin for the Critical Illness Recovery Hospital Segment was 9.2% for the three months ended September 30, 2025, compared to 8.7% for the same period in 2024[127]. Operating Expenses - Total operating expenses for the three months ended September 30, 2025, were $1,256.0 million, or 92.1% of revenue, down from 93.0% in the same period of 2024[125]. - Cost of services for the three months ended September 30, 2025, was $1,216.0 million, or 89.2% of revenue, compared to 89.3% in the prior year[125]. - General and administrative expenses decreased to $40.1 million, or 2.9% of revenue, from $47.3 million, or 3.7% of revenue, in the same period of 2024[125]. - Operating expenses were $3,681.5 million, or 90.8% of revenue, for the nine months ended September 30, 2025, compared to $3,524.0 million, or 91.0% of revenue, for the same period in 2024[141]. Cash Flow and Financing - Cash flows from operating activities provided $282.1 million for the nine months ended September 30, 2025, compared to $392.4 million for the same period in 2024[154]. - Investing activities used $149.6 million of cash flows for the nine months ended September 30, 2025, primarily for the purchase of property and equipment[156]. - Financing activities used $132.2 million of cash flows for the nine months ended September 30, 2025, with principal uses including $99.5 million for stock repurchases and $23.7 million in dividend payments[157]. - Cash and cash equivalents were $60.1 million as of September 30, 2025, with $419.1 million available under revolving facilities[162]. - The Board of Directors authorized a stock repurchase program of up to $1.0 billion, with 6,375,512 shares repurchased at a cost of approximately $96.5 million during the nine months ended September 30, 2025[160]. Market and Regulatory Environment - The company anticipates potential risks including changes in government reimbursement policies and economic conditions that could impact revenue and profitability[73]. - Medicare program revenue represented approximately 29% of total revenue for both the nine months ended September 30, 2025, and the year ended December 31, 2024[89]. - The standard federal rate for fiscal year 2026 is set at $50,825, an increase from $49,383 in fiscal year 2025[98]. - The fixed-loss amount for high-cost outlier cases under LTCH-PPS for fiscal year 2026 is $78,936, up from $77,048 in fiscal year 2025[98]. - The One Big Beautiful Bill Act is projected to reduce federal funding for Medicaid and CHIP by approximately $1 trillion over the next 10 years, impacting healthcare providers[93]. Future Plans and Initiatives - The company intends to pursue new joint venture relationships and open new outpatient rehabilitation clinics to drive incremental growth[161]. - An interest rate cap was entered into effective March 31, 2025, limiting the Term SOFR rate to 4.5% on $1.0 billion of principal outstanding under the term loan[170]. - A 0.25% increase in market interest rates will impact annual interest expense on variable rate debt by $3.0 million for the first increase, with subsequent increases being partially mitigated by the interest rate cap[171].

Group 1: Select Medical Holdings Corporation (SEM) - Select Medical Holdings Corporation is considered one of the most undervalued small-cap stocks currently available for investment, with a Buy rating and a price target of $21 from Benchmark Co. analyst Bill Sutherland [1] - Bank of America Securities analyst Joanna Gajuk also issued a Buy rating on SEM with a price target of $15, citing the recent delay of the 20% Rule by CMS as a factor that could improve the company's financial outlook for fiscal Q3 2025 [3] - The company operates in medical rehabilitation services, divided into three segments: Critical Illness Recovery Hospital, Rehabilitation Hospital, and Outpatient Rehabilitation [4] Group 2: Market Context and Analyst Insights - RBC Capital raised its price target for QUALCOMM to $20 from $16, maintaining an Outperform rating, indicating that the current stock dislocation presents an attractive entry point for investors [2]

Core Viewpoint - Select Medical (SEM) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which are a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - For Select Medical, the Zacks Consensus Estimate has increased by 4.1% over the past three months, with expected earnings of $1.19 per share for the fiscal year ending December 2025, showing no year-over-year change [8]. Investment Implications - The upgrade reflects an improvement in Select Medical's underlying business, suggesting that investor sentiment may drive the stock price higher [5][10]. - The Zacks Rank system classifies stocks into five groups, with only the top 20% receiving a "Strong Buy" or "Buy" rating, indicating superior earnings estimate revisions [9][10].

Core Viewpoint - Select Medical (SEM) shares have increased by 7.8% in the past four weeks, closing at $13.19, with a mean price target of $18 indicating a potential upside of 36.5% [1] Price Targets and Analyst Estimates - The mean estimate consists of six short-term price targets with a standard deviation of $2.9, where the lowest estimate is $14.00 (6.1% increase) and the highest is $21.00 (59.2% increase) [2] - A low standard deviation among price targets suggests a high degree of agreement among analysts regarding the stock's price movement [9] Earnings Estimates and Analyst Sentiment - Analysts are optimistic about SEM's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which has shown a strong correlation with stock price movements [11] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 1.1%, with one estimate moving higher and no negative revisions [12] Zacks Rank and Investment Potential - SEM holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] - While consensus price targets may not be reliable for predicting the extent of gains, they can provide a directional guide for potential price movement [14]

Core Insights - Select Medical Holdings experienced a significant stock price increase of approximately 14% during morning trading on Wednesday, marking its best intraday gain in over five years [2] - The trading volume exceeded 1 million shares, indicating heightened investor interest and activity in the stock [2]

Group 1: Dell Technologies Inc. - Dell raised its annual revenue growth and annual adjusted EPS growth guidance [2] - Dell plans to increase its quarterly dividend by at least 10% annually through fiscal 2030 [2] - Dell shares jumped 7.7% to $162.57 on Wednesday [2] - Wells Fargo analyst Aaron Rakers maintained Dell with an Overweight rating and raised the price target from $160 to $180 [1] - Bernstein analyst Mark Newman maintained the stock with an Outperform rating and raised the price target from $175 to $180 [1] Group 2: Market Performance - U.S. stocks were higher, with the Dow Jones index gaining around 100 points on Wednesday [1] - Several other stocks recorded significant gains, including Nanobiotix S.A. which jumped 24.4% to $26.08 [4] - I-Mab gained 22.7% to $5.36, and Diginex Limited rose 19.2% to $28.85 [4] - Critical Metals Corp. gained 18% to $11.82 after signing a 10-year offtake deal [4] - Select Medical Holdings Corporation gained 12.8% to $14.71, with RBC Capital analyst raising the price target from $16 to $20 [4]

Core Points - Select Medical Holdings Corporation will release its financial results for the third quarter ended September 30, 2025, on October 30, 2025, after market close [1] - A conference call to discuss the third quarter results and business outlook is scheduled for October 31, 2025, at 9:00 am ET, which will be available via live webcast [2] - Select Medical is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States, with operations in 40 states and the District of Columbia as of June 30, 2025 [4] Company Overview - As of June 30, 2025, Select Medical operated 104 critical illness recovery hospitals in 29 states, 36 rehabilitation hospitals in 14 states, and 1,919 outpatient rehabilitation clinics in 39 states and the District of Columbia [4] - The company’s reportable segments include critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation [4]

Core Viewpoint - Select Medical Holdings Corporation (SEM) has experienced significant underperformance in 2025, with shares down 33.4% year to date, compared to the industry's 29.7% gain and the S&P 500's 14.2% growth. The stock is currently trading at $12.55, which is 69.4% below its 52-week high of $40.98 [1]. Group 1: Challenges Facing SEM - The Critical Illness Recovery Hospital unit has shown weakness, with admissions declining by 1% in 2023, 1.2% in 2024, and 0.5% in the first half of 2025. This has led to lower patient days and revenue per patient day, resulting in a 28% year-over-year decrease in operating income [3]. - Rising costs are a concern, with expenses increasing by 7.9% in 2024 and 3.4% in the first half of 2025, with no signs of slowing down. Additionally, uncertainty regarding future government medical aid adds pressure [4]. - SEM's trailing 12-month return on equity is 8.9%, significantly below the industry average of 21.1%, indicating weak capital efficiency [4]. - The company's net debt-to-capital ratio is high at 47.2%, with long-term debt at $1.8 billion and only $52.3 million in cash as of June 30, 2025 [5]. Group 2: Financial Projections - The Zacks Consensus Estimate projects SEM's 2025 revenues at $5.37 billion, reflecting an 18.9% year-over-year decline, followed by a 4.9% recovery in 2026. EPS is expected to be $1.17 in 2025, up 24.5%, with an additional 14.3% increase in 2026 [6][7]. Group 3: Positive Aspects - The Rehabilitation Hospital segment is performing well, with occupancy at 82% in the first half of 2025. Admissions and patient days increased by 8.1% and 6.4%, respectively, while operating income rose by 12.1% in 2024 and 16.1% in the first half of 2025, maintaining margins above 20% [8]. - Operating cash flow was strong, at $517.9 million in 2024 and $106.8 million in the first half of 2025. The company plans to add 412 more beds between 2025 and mid-2027, which could enhance growth [9]. - SEM's valuation appears attractive, trading at a forward P/E of 9.69X, below its five-year median of 12.75X and the industry average of 13.55X, suggesting potential for a rebound as fundamentals stabilize. The company currently holds a Value Score of A [10]. Group 4: Overall Assessment - SEM is facing significant challenges, including poor performance in its Critical Illness Recovery Hospitals, rising costs, high leverage, and lower returns compared to peers. However, the Rehabilitation Hospital segment shows promise with healthy occupancy and cash generation. The company's undervalued trading multiples indicate potential upside if execution improves. The stock is rated Zacks Rank 3 (Hold), suggesting that investors may consider maintaining their current positions [11].