Wrapping up Q3 earnings, we look at the numbers and key takeaways for the outpatient & specialty care stocks, including U.S. Physical Therapy (NYSE: USPH) and its peers.

The outpatient and specialty care industry delivers targeted medical services in non-hospital settings that are often cost-effective compared to inpatient alternatives. This means that they are more desired as rising healthcare costs and ways to combat them become more and more top-of-mind. Outpatient and specialty care providers boast revenue streams that are stable due to the recurring nature of treatment for chronic conditions and long-term patient relationships. However, their reliance on government reimbursement programs like Medicare means stroke-of-the-pen risk. Additionally, scaling a network of facilities can be capital-intensive with uneven return profiles amid competition from integrated healthcare systems. Looking ahead, the industry is positioned to grow as demand for outpatient services expands, driven by aging populations, a rising prevalence of chronic diseases, and a shift toward value-based care models. Tailwinds include advancements in medical technology that support more complex procedures in outpatient settings and the increasing focus on preventive care, which can be aided by data and AI. However, headwinds such as reimbursement rate cuts, labor shortages, and the financial strain of digitization may temper growth.

The 7 outpatient & specialty care stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was in line.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 5.8% since the latest earnings results.

U.S. Physical Therapy (NYSE: USPH)

With a nationwide footprint spanning 671 clinics across 42 states, U.S. Physical Therapy (NYSE: USPH) operates a network of outpatient physical therapy clinics and provides industrial injury prevention services to employers across the United States.

U.S. Physical Therapy reported revenues of $197.1 million, up 17.3% year on year. This print exceeded analysts’ expectations by 1%. Overall, it was a satisfactory quarter for the company with a narrow beat of analysts’ revenue estimates.

Chris Reading, Chief Executive Officer, said, “This was a very solid quarter for us across the board with record visits per clinic per day, continued clinic expansion with 84 net owned additions since the third quarter of 2024, and sustained double-digit growth in our injury prevention business. Importantly, we are also making progress on some key initiatives that will benefit our 2026 growth and performance, along with an expected and overdue Medicare pricing lift.”

U.S. Physical Therapy scored the fastest revenue growth of the whole group. Even though it had a relatively good quarter, the market seems discontent with the results. The stock is down 4% since reporting and currently trades at $71.64.

Is now the time to buy U.S. Physical Therapy? Access our full analysis of the earnings results here, it’s free for active Edge members.

Best Q3: Select Medical (NYSE: SEM)

With a nationwide network spanning 46 states and over 2,700 healthcare facilities, Select Medical (NYSE: SEM) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States.

Select Medical reported revenues of $1.36 billion, up 7.2% year on year, outperforming analysts’ expectations by 2.7%. The business had a strong quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ revenue estimates.

Select Medical delivered the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 4% since reporting. It currently trades at $13.63.

Is now the time to buy Select Medical? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: DaVita (NYSE: DVA)

With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE: DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.

DaVita reported revenues of $3.42 billion, up 4.8% year on year, in line with analysts’ expectations. It was a slower quarter as it posted a significant miss of analysts’ EPS estimates and revenue in line with analysts’ estimates.

DaVita delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 4.3% since the results and currently trades at $121.10.

Read our full analysis of DaVita’s results here.

agilon health (NYSE: AGL)

Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE: AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.

agilon health reported revenues of $1.44 billion, down 1.1% year on year. This number beat analysts’ expectations by 1%. Taking a step back, it was a slower quarter as it recorded full-year EBITDA guidance missing analysts’ expectations significantly and a significant miss of analysts’ EPS estimates.

agilon health had the slowest revenue growth among its peers. The company added 5,000 customers to reach a total of 503,000. The stock is down 13.9% since reporting and currently trades at $0.63.

Read our full, actionable report on agilon health here, it’s free for active Edge members.

Surgery Partners (NASDAQ: SGRY)

With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.

Surgery Partners reported revenues of $821.5 million, up 6.6% year on year. This result was in line with analysts’ expectations. Aside from that, it was a slower quarter as it logged a significant miss of analysts’ EPS estimates and full-year revenue guidance missing analysts’ expectations.

The stock is down 26.9% since reporting and currently trades at $15.86.

Read our full, actionable report on Surgery Partners here, it’s free for active Edge members.

Market Update

The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.

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