Select Medical 2025 Q2 Earnings Misses Targets as Net Income Drops 38.9%

Select Medical (SEM) reported its fiscal 2025 Q2 earnings on Jul 31st, 2025. The healthcare services company met Wall Street’s revenue expectations in Q2 with sales of $1.34 billion, marking a 23.9% year-on-year decline, in line with analyst estimates. The company's GAAP profit of $0.32 per share exceeded analysts’ consensus estimates by 13.9%. However, the operating margin was down from 9% to 6.5% year-on-year. Select Medical reaffirmed its full-year revenue guidance at $5.4 billion and EPS outlook at $1.14.

Revenue

The total revenue of Select Medical decreased by 4.3% to $1.28 billion in 2025 Q2, down from $1.34 billion in 2024 Q2.

Earnings/Net Income

Select Medical's EPS rose 87.5% to $0.60 in 2025 Q2 from $0.32 in 2024 Q2, marking continued earnings growth. Meanwhile, the company's profitability strengthened with net income of $94.77 million in 2025 Q2, marking 63.7% growth from $57.88 million in 2024 Q2. The Company has sustained profitability for 19 years over the corresponding fiscal quarter, reflecting stable business performance. Despite challenges, the EPS reflects positive momentum.

Price Action

The stock price of Select Medical has edged up 2.85% during the latest trading day, climbed 4.60% during the most recent full trading week, and edged down 2.57% month-to-date.

Post-Earnings Price Action Review

Over the past three years, the strategy of buying Select Medical (SEM) shares after its quarterly earnings report release and selling them 30 days later has proven ineffective. This approach has yielded no return, underperforming the benchmark by 3.89% with a CAGR of 0.00%. The strategy is characterized by a maximum drawdown of 0.00% and volatility of 0.00%, indicating a risk-averse yet ineffective investment tactic. Despite its low-risk nature, the strategy lacks efficacy in generating returns, highlighting the need for reassessment of investment strategies post-earnings announcements.

CEO Commentary

Select Medical's CEO emphasized the company's solid performance in the second quarter, noting a 4.5% revenue growth driven by robust demand across its rehabilitation hospital segment, which saw a significant 17.2% increase in revenue. Although the critical illness recovery hospital segment faced challenges with a slight revenue decline, the CEO remains optimistic about the overall strategic investments being made to enhance market positioning and operational efficiency. The leadership is committed to navigating challenges effectively while capitalizing on growth opportunities within the healthcare sector.

Guidance

Select Medical anticipates continued revenue growth, expecting to build on the momentum observed in the second quarter. The company guides for a sustained focus on optimizing its operational performance and enhancing patient care across its service lines. The leadership expects ongoing improvements in adjusted EBITDA margins and earnings per share, reflecting confidence in the execution of their strategic priorities while adapting to market dynamics.

Additional News

Recently, Select Medical announced a strategic partnership with Ballad Health to jointly operate Select Specialty Hospital – Tri-Cities, a 46-bed critical illness recovery hospital in Kingsport, Tennessee. This facility will relocate from Ballad Health's Bristol Regional Medical Center to Indian Path Community Hospital as a hospital-in-hospital arrangement. Select Medical will serve as the majority owner and managing partner of the joint venture. Additionally, Select Medical's Board of Directors declared a cash dividend of $0.0625 per share, payable on August 28, 2025, to stockholders of record as of August 13, 2025. The company continues its stock repurchase program, having bought back shares worth $96.5 million in H1 2025.