What Happened?
Shares of outpatient physical therapy provider U.S. Physical Therapy (NYSE: USPH) fell 11.5% in the morning session after the company reported third-quarter results that pointed to declining year-over-year profitability, despite revenue beating expectations.
The company announced adjusted earnings of $0.66 per share, which was in line with analyst estimates but represented a decrease from the $0.69 per share earned in the same quarter last year. While U.S. Physical Therapy's revenue grew 17.3% year-on-year to $197.1 million, surpassing Wall Street's forecast, the drop in per-share earnings appeared to be the primary concern for investors. The weaker profitability, alongside a slight miss on adjusted EBITDA, overshadowed the strong sales growth, leading to a negative market reaction.
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What Is The Market Telling Us
U.S. Physical Therapy’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. Moves this big are rare for U.S. Physical Therapy and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock dropped 3.4% on the news that markets pulled back, reversing early gains, as investor sentiment remained cautious despite a softer-than-expected inflation reading. Stocks rose in the morning session after an unexpected drop in the Producer Price Index (PPI) for August signaled easing inflation and raised expectations for a potential Federal Reserve interest rate cut. The U.S. Bureau of Labor Statistics reported that the PPI, which measures wholesale prices, edged down 0.1% the previous month, contrary to analyst expectations for a 0.3% rise. This data gives the Federal Reserve more flexibility to consider lowering interest rates to stimulate the economy.
U.S. Physical Therapy is down 9.2% since the beginning of the year, and at $79.78 per share, it is trading 20.1% below its 52-week high of $99.91 from December 2024. Investors who bought $1,000 worth of U.S. Physical Therapy’s shares 5 years ago would now be looking at an investment worth $871.16.
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