Select Medical Q4 Earnings Miss Estimates on Increasing Expenses

Select Medical Holdings Corporation SEM reported fourth-quarter 2025 adjusted earnings per share (EPS) of 16 cents, which missed the Zacks Consensus Estimate by 31.6%. The bottom line declined 11.1% year over year.

Net operating revenues advanced 6.4% year over year to $1.4 billion. The top line beat the consensus mark by 2.6%.

The quarterly earnings suffered due to an elevated expense level, a decline in patient days exerted pressure on profitability in the Critical Illness Recovery Hospital segment and lower revenue per visit did the same for the Outpatient Rehabilitation unit. However, the downside was partially offset by solid revenue growth in the Rehabilitation Hospital segment, driven by higher admissions and improved occupancy.

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 Q4 Performance

Total costs and expenses were $1.3 billion, which increased 3.2% year over year and came higher than our estimate by 3.9%. The year-over-year rise was due to higher costs of services, exclusive of depreciation and amortization.

Adjusted EBITDA declined 9.8% year over year to $104.7 million and missed our estimate of $126.7 million.

Select Medical’s Segmental Update

Critical Illness Recovery Hospital

The segment recorded revenues of $629.7 million in the fourth quarter, which grew 4.9% year over year, and surpassed the Zacks Consensus Estimate and our estimate of $613.3 million. The unit benefited on the back of a 3% year-over-year increase in admissions and a 5.9% rise in revenue per patient day. Patient days slipped 1% year over year. The occupancy rate remained flat year over year at 67%.

Adjusted EBITDA advanced 5.3% year over year to $66.4 million but fell short of the consensus mark and our estimate of $106.1 million. The adjusted EBITDA margin of 10.5% remained constant year over year.

Rehabilitation Hospital

The unit’s revenues rose 15.2% year over year to $339.2 million, which surpassed the Zacks Consensus Estimate and our estimate of $326.9 million. The favorable performance stemmed from year-over-year increases of 9.6% and 9.8%, respectively, in admissions and patient days. The occupancy rate was 82%, which improved 120 bps year over year in the quarter under review.

Adjusted EBITDA improved 11.1% year over year to $69.2 million, which beat the consensus mark and our estimate of $35.1 million. However, the adjusted EBITDA margin of 20.4% deteriorated 80 bps year over year.

Outpatient Rehabilitation

Revenues totaled $324.6 million in the segment, which rose 1.6% year over year, and beat the Zacks Consensus Estimate and our estimate of $318.1 million. The unit’s performance was aided by a 4.9% year-over-year increase in visits. Revenue per visit dipped 3.9% year over year.

Adjusted EBITDA tumbled 57.9% year over year to $11.2 million and lagged the consensus mark and our estimate of $41.4 million. The adjusted EBITDA margin of 3.4% deteriorated 490 bps year over year.

Select Medical’s Financial Position (As of Dec. 31, 2025)

Select Medical exited the fourth quarter with cash and cash equivalents of $26.5 million, which fell 55.6% from the 2024-end level.

Total assets of $5.9 billion increased 4.3% from the 2024-end figure.

Long-term debt, net of the current portion, amounted to $1.8 billion, up 6.6% from the figure as of Dec. 31, 2024.

Total equity of $2 billion inched up 1.5% from the 2024-end level.

Select Medical generated net cash from operations of $64.3 million in the reported quarter, which fell 48.7% year over year.

Select Medical’s Share Repurchase & Dividend Update

Select Medical bought back shares worth around $96.5 million in 2025.

On Feb. 12, 2026, management approved a cash dividend of 6.25 cents per share, which will be paid out on March 12 to its shareholders of record as of March 2.

Select Medical’s 2026 Outlook

Management expects revenues within $5.6-$5.8 billion, the mid-point of which represents a 3.6% increase from the 2025 figure.

Adjusted EBITDA is expected to be between $520 million and $540 million. EPS is anticipated to be within $1.22-$1.32.

Interest expense is projected to be at $118 million, while depreciation and amortization is estimated at $146 million.

SEM’s Zacks Rank

SEM currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

How Did Peers Perform?

Several companies in the Medical space, including The Cigna Group CI, UnitedHealth Group Incorporated UNH and Elevance Health, Inc. ELV, have already reported their financial results for the December quarter of 2025. Here’s how they had performed:

Cigna reported fourth-quarter 2025 adjusted earnings per share of $8.08, which beat the Zacks Consensus Estimate by 2.7%. The bottom line advanced 22% year over year. The results benefited on the back of strong results from its Evernorth Health Services segment, driven by new business and client relationship expansion, Pharmacy Benefit Services’ strength and improved specialty volumes. However, the upside was partly offset by a decline in Cigna’s medical customers following divestitures to Health Care Services Corporation and an elevated expense level.

UnitedHealth reported fourth-quarter 2025 adjusted EPS of $2.11, which beat the Zacks Consensus Estimate of $2.09. However, the bottom line fell 69% from the year-ago period. The earnings were aided by growth in commercial fee-based membership and the strength witnessed in Optum Rx. However, UnitedHealth’s elevated medical costs and declining risk-based membership partially offset the positives.

Elevance reported fourth-quarter 2025 adjusted EPS of $3.33, which surpassed the Zacks Consensus Estimate by 7.3%. The bottom line rose 3.1% year over year. The earnings benefited on the back of strong growth in premiums. Segment-wise, the Carelon division posted a robust revenue surge, aided by buyout and scaling risk-based services, while Health Benefits saw increased premium yields and Medicare Advantage membership growth. However, the upside was partly offset by a decline in Elevance’s overall medical membership and an elevated expense level.

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