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On Dec 7, Zacks Investment Research upgraded HCA Holdings Inc. (HCA - Snapshot Report) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

HCA has been experiencing rising earnings estimates on the back of improved core fundamentals in third-quarter 2013 and a raised guidance. Moreover, the company’s modest clinical initiatives, hospital coverage and strong capital position have been impressive.

Additionally, this healthcare service provider delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 2.7%. HCA also outperformed the one-year S&P 500, which posted an increase of 27.5% against the modest return of 39.2% clocked by the company.

On Nov 5, HCA reported third-quarter operating earnings of 79 cents per share, which came in line with the Zacks Consensus Estimate but beat the year-ago quarter number by 2 cents.

Although expenses were higher, the top line increased 4.9% over the prior-year quarter, driven by growth in volume and higher revenue per equivalent admission. The quarter also witnessed improvement in same facility equivalent admissions and same facility admissions. Consequently, EBITDA and operating cash flow appreciated, in turn boosting the balance sheet position.

Concurrently, management also projected EBITDA to be in the higher-end of the prior range of $6.25 to $6.50 billion in 2013.

HCA’s growth strategy of enhancing core operating leverage is showing results. The company is also expected to benefit from the healthcare reforms that are to be implemented in 2014, as more citizens will fall under the medical insurance coverage. Moreover, the company’s consistent capital deployment activities continue to boost investors’ confidence in the stock.

Based on HCA’s improved performance, the Zacks Consensus Estimate for 2013 rose 2.5% to $3.31 per share in the last 60 days. The estimate for 2014 is pegged at $3.85, up 1.6% over the same period.

Meanwhile, the Most Accurate Estimate for HCA’s 2014 earnings stands at $3.94 a share, resulting in an Earnings ESP of +2.3%.

Other Insurers Worth a Look

Investors interested in the financial sector may also consider stocks like HCI Group Inc. (HCI - Snapshot Report), Endurance Specialty Holdings Ltd. (ENH - Snapshot Report) and CNA Financial Corp. (CNA - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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