Universal Health Realty Stock Gains Despite Earnings and FFO Dip

Core Insights - Universal Health Realty Income Trust (UHT) reported a net income of $4.8 million for Q1 2025, a 9.9% decline from $5.3 million in the same period last year, primarily due to a decrease in property-level income and an increase in interest expenses [2][7] - The company's revenues fell to $24.5 million, down 2.4% year-over-year, while funds from operations (FFO) decreased to $11.9 million, reflecting a 3.9% drop [2][4] - UHT maintained its quarterly dividend at $0.735 per share, slightly up from $0.725 a year ago, resulting in a total payout of $10.2 million in March 2025 [4] Financial Performance - Operating expenses decreased by 1% to $15.5 million, while interest expenses rose by 2.7% to $4.7 million due to higher average borrowings [3][6] - Lease revenue from Universal Health Services (UHS) facilities decreased by 3.9% to $8.3 million, and non-related party lease revenue declined by 1.1% to $14.3 million [2][3] - The weighted average number of diluted shares outstanding increased marginally to 13.85 million [4] Management Commentary - Management acknowledged challenges from higher interest expenses and declining income from properties, emphasizing adherence to a strategy focused on healthcare-related real estate [5][6] - The company expressed concerns over macroeconomic pressures affecting tenants, including wage inflation and staff shortages [5][8] Market Conditions - The company highlighted the impact of rising interest rates on its financial outlook, noting that further rate hikes could exacerbate existing challenges [6][9] - Tenant operators in the healthcare sector are facing systemic pressures, which directly affect UHT's rental revenues and lease stability [8][9] Strategic Focus - As of March 31, UHT held investments in 76 properties across 21 states, maintaining a strategic focus on healthcare and human-service-related real estate [10][11] - The Trust reported $349.5 million in borrowings under its $425 million credit facility, with $75.5 million available, indicating a stable liquidity position [10]