Select Medical Shares Down 20% Despite Q2 Earnings Beat

Shares of Select Medical Holdings Corporation SEM have fallen 20.4% since it reported second-quarter 2025 results on July 31. The quarterly results were affected by reduced occupancy rates in the Rehabilitation Hospital segment, coupled with higher costs and expenses. However, the negatives were offset by the improved revenue per patient day in the Rehabilitation hospital segment, occupancy rates in the Critical Illness Recovery Hospital and increased admissions.

Select Medical reported second-quarter 2025 adjusted earnings per share (EPS) of 32 cents, which beat the Zacks Consensus Estimate of 28 cents. However, the bottom line decreased from 60 cents a year ago.

Net operating revenues amounted to $1.3 billion, which rose 4.5% from a year ago. The metric surpassed the consensus mark by 1.5%.

Select Medical Holdings Corporation Price, Consensus and EPS Surprise

Select Medical Holdings Corporation price-consensus-eps-surprise-chart | Select Medical Holdings Corporation Quote

Select Medical’s Q2 Performance

Total costs and expenses increased 3.9% year over year to $1.3 billion, which beat our estimate of $1.2 billion. The increase was due to escalating costs of services, exclusive of depreciation and amortization.

Adjusted EBITDA of $125.4 million rose from $124.7 million in the prior-year quarter but missed our estimate of $129 million.

Select Medical’s Segmental Update

Critical Illness Recovery Hospital

The segment's revenues amounted to $601.1 million, which decreased 0.6% year over year and also missed the consensus mark of $641.4 million. The unit weakened from a 0.5% year-over-year decrease in revenue per patient day. Patient days declined 0.1%, while admissions improved 0.9% year over year. The occupancy rate, however, improved 200 basis points (bps) year over year.

Adjusted EBITDA of $56.3 million declined 21.6% year over year and also missed the Zacks Consensus Estimate and our estimate of $76.1 million. The adjusted EBITDA margin deteriorated 250 bps year over year to 9.4%.

Rehabilitation Hospital

The segment’s revenues improved 17.2% year over year to $313.8 million. The figure beat the consensus mark of $264.8 million. Year-over-year increases of 9.3% and 7.6%, respectively, in admissions and patient days contributed to the unit’s strong performance. The occupancy rate, however, deteriorated 200 basis points (bps) year over year.

Adjusted EBITDA of $71 million rose 14.7% year over year and beat the Zacks Consensus Estimate of $57 million. However, the adjusted EBITDA margin deteriorated 50 bps year over year to 22.6%.

Outpatient Rehabilitation

Revenues amounted to $327.6 million in the segment, which grew 3.8% year over year and beat the consensus mark of $318.2 million. Revenue per patient visit remained constant year over year.

Adjusted EBITDA of $30.5 million increased 6.1% year over year but missed the Zacks Consensus Estimate of $42.7 million. The adjusted EBITDA margin improved 20 bps year over year to 9.3%.

Select Medical’s Financial Position (As of June 30, 2025)

Select Medical exited the second quarter with cash and cash equivalents of $52.3 million, which declined from $59.7 million at 2024-end.

Total assets of $5.7 billion rose from $5.6 billion at 2024-end.

Long-term debt, net of the current portion, amounted to $1.8 billion, up from $1.7 billion at 2024-end.

Total equity of $2 billion rose 2.4% from the 2024-end level.

Select Medical provided net cash by operations of $110.3 million in the reported quarter, which declined from $278.2 million a year ago.

Select Medical’s Share Repurchase & Dividend Update

Select Medical bought back shares worth $96.5 million in the first half of 2025.

From the inception of the common stock repurchase program through June 30, 2025, Select Medical has repurchased shares worth approximately $696.8 million.

On July 30, 2025, management approved a cash dividend of 6.25 cents per share, which will be paid out on Aug. 28 to its shareholders of record as of Aug. 13.

Select Medical Reaffirms 2025 Outlook

Management earlier anticipated revenues to be between $5.3 billion and $5.5 billion. Management earlier expected adjusted EBITDA to be between $510 million and $530 million.

EPS is still expected to be between $1.09 and $1.19. Interest expense is expected to be $116 million.

SEM’s Zacks Rank & Key Picks

SEM currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Medical space are West Pharmaceutical Services Inc WST, Fresenius Medical Care AG & Co. FMS and Tenet Healthcare Corp THC, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for West Pharmaceutical Services’ current-year earnings of $6.60 per share has witnessed four upward revisions in the past 30 days against no movement in the opposite direction. West Pharmaceutical Services beat earnings estimates in each of the trailing four quarters, with the average surprise being 16.8%. The consensus estimate for current-year revenues is pegged at $3 billion, indicating 4.2% year-over-year growth.

The consensus estimate for Fresenius Medical Care’s current-year earnings of $2.22 per share has witnessed two upward revisions in the past 60 days against no movement in the opposite direction. Fresenius Medical Care beat earnings estimates in three of the trailing four quarters and met once, with the average surprise being 6.6%. The consensus estimate for current-year revenues is pegged at $22 billion, indicating 5.2% year-over-year growth.

The Zacks Consensus Estimate for Tenet Healthcare’s current-year earnings of $14.92 per share has witnessed seven upward revisions in the past 30 days against no movement in the opposite direction. Tenet Healthcare beat earnings estimates in each of the trailing four quarters, with an average surprise being 31.2%. The consensus estimate for current-year revenues is pegged at $21.1 million, indicating 2.1% year-over-year growth.

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This article originally published on Zacks Investment Research (zacks.com).

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