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Why Universal Health Services, Inc. Stock Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Universal Health Services (NYSE: UHS  ) , a hospital management corporation, climbed by as much as 11% today after the company reported a surge in second-quarter revenue in its Q2 earnings release.

So What: Universal's net revenue overall surged by 10% year-over-year in the second quarter, helping lift Universal's 2014 to a first-half net revenue gain of 7.5%. Admissions have spiked according to the company, and an increasing number of patients with insurance helped push down bad debt by nearly 30% for the quarter. Not all of the earnings report was positive, however: Universal posted a significant hike in expenses, outpacing revenue growth with a 12.8% jump in Q2. That helped weigh down the company's net profit, which hung flat year-over-year.

Now What: Even with expenses jumping, investors rallied around this stock after Universal raised its full-year earnings outlook significantly. The company now projects 2014 diluted EPS of between $5.55 and $5.85, up from an earlier guidance of between $4.80 and $5.10.

The launch of Obamacare looks to have played a big part of bringing in more admissions, particularly as adjusted, same-facility admissions jumped by more than 3% for the quarter. Bringing down bad debt is a key strength of Universal's Q2, and with the company's operating margins still in double-figure percentages, this corporation's looking strong heading into the latter half of 2014.

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Dan Carroll

Dan began writing for the Motley Fool in 2012. He is a health care specialist who also follows the defense industry along with tracking the broader U.S. and international markets.

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