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HCA Healthcare Up 11% Since Q2, Will the Rally Continue?
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Shares of HCA Healthcare Inc. (HCA - Free Report) have been in favor with investors since the second-quarter earnings release, which painted a favorable picture of the company’s operations.
Shares of the company have since then gained nearly 11% compared with the industry’s growth of 7.5%.
Investors were impressed with solid volume and rate growth combined with good expense management that provided strong adjusted EBITDA growth for the quarter.
Further an increase in earnings expectations for full-year 2018 must have been a catalyst in pushing the company’s shares higher.
Particularly impressive were solid volume trends for the second quarter, with reported admissions increasing 4.5% and equivalent admissions increasing 5.1% year over year.
The company’s same-facility managed care and exchange adjusted admissions increased 1.9% in the second quarter. This was the highest growth rate since the first quarter of 2016.
Share price must have also reacted positively in response to the raised 2018 guidance for revenues, adjusted EBITDA and earnings per share. The company now expects revenues of $45.5-$46.5 billion, up from the previous projection of $45-$46 billion, and adjusted EBIDTA of $8.65-$8.85, up from the prior guidance of $8.45-$8.75 billion. EPS is expected between $9 and $9.40. The company’s capital expenditures are likely to be about $3.5 billion.
Will the Stock Grow Further?
We expect the company’s strong earnings potential to boost its share price. These factors should aid the company’s operating performance:
Acquisitions: HCA Healthcare has been emphasizing acquisitions to expedite growth. These deals have led to an increase in number of hospital, rise in patient volumes and enabled network expansion across several markets. The company’s acquisitions are expected to add scale to its business, positioning it better to weather the regulatory uncertainty in the healthcare sector. HCA Healthcare expects 2017 acquisitions to contribute roughly 70 to 100 basis points to growth in 2018.
Strong Balance Sheet: HCA Healthcare’s balance sheet and cash flows (the company has consistently generated increased free cash flow for the past several years) are impressive and have the potential for accretive mergers and acquisitions alongside shareholder-friendly capital deployment through buybacks.
Capital Expenditures to Bring Growth: In January 2018, it announced plans to increase its three-year capital expenditure program to pursue growth opportunities in its existing markets. The new capital investment program is expected to be roughly $10.5 billion, up from the previous three-year spend of nearly $8.2 billion.
Demographic Changes: The hospital industry is witnessing greater demand for its services owing to increasing baby boomer population, diminishing unemployment, higher disposable income, economic strength, rising prevalence of chronic disease and growth in insured population.
HCA Healthcare carries a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the medical space are Medpace Holdings, Inc. (MEDP - Free Report) , PRA Health Sciences, Inc. and OpGen, Inc. (OPGN - Free Report) . Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace Holdings, PRA Health Sciences and OpGen delivered positive surprises in the last four quarters, with an average beat of 23.97%, 7.96% and 4.5%, respectively.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
HCA Healthcare Up 11% Since Q2, Will the Rally Continue?
Shares of HCA Healthcare Inc. (HCA - Free Report) have been in favor with investors since the second-quarter earnings release, which painted a favorable picture of the company’s operations.
Shares of the company have since then gained nearly 11% compared with the industry’s growth of 7.5%.
Investors were impressed with solid volume and rate growth combined with good expense management that provided strong adjusted EBITDA growth for the quarter.
Further an increase in earnings expectations for full-year 2018 must have been a catalyst in pushing the company’s shares higher.
Particularly impressive were solid volume trends for the second quarter, with reported admissions increasing 4.5% and equivalent admissions increasing 5.1% year over year.
The company’s same-facility managed care and exchange adjusted admissions increased 1.9% in the second quarter. This was the highest growth rate since the first quarter of 2016.
Share price must have also reacted positively in response to the raised 2018 guidance for revenues, adjusted EBITDA and earnings per share. The company now expects revenues of $45.5-$46.5 billion, up from the previous projection of $45-$46 billion, and adjusted EBIDTA of $8.65-$8.85, up from the prior guidance of $8.45-$8.75 billion. EPS is expected between $9 and $9.40. The company’s capital expenditures are likely to be about $3.5 billion.
Will the Stock Grow Further?
We expect the company’s strong earnings potential to boost its share price.
These factors should aid the company’s operating performance:
Acquisitions: HCA Healthcare has been emphasizing acquisitions to expedite growth. These deals have led to an increase in number of hospital, rise in patient volumes and enabled network expansion across several markets. The company’s acquisitions are expected to add scale to its business, positioning it better to weather the regulatory uncertainty in the healthcare sector. HCA Healthcare expects 2017 acquisitions to contribute roughly 70 to 100 basis points to growth in 2018.
Strong Balance Sheet: HCA Healthcare’s balance sheet and cash flows (the company has consistently generated increased free cash flow for the past several years) are impressive and have the potential for accretive mergers and acquisitions alongside shareholder-friendly capital deployment through buybacks.
Capital Expenditures to Bring Growth: In January 2018, it announced plans to increase its three-year capital expenditure program to pursue growth opportunities in its existing markets. The new capital investment program is expected to be roughly $10.5 billion, up from the previous three-year spend of nearly $8.2 billion.
Demographic Changes: The hospital industry is witnessing greater demand for its services owing to increasing baby boomer population, diminishing unemployment, higher disposable income, economic strength, rising prevalence of chronic disease and growth in insured population.
HCA Healthcare carries a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the medical space are Medpace Holdings, Inc. (MEDP - Free Report) , PRA Health Sciences, Inc. and OpGen, Inc. (OPGN - Free Report) . Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace Holdings, PRA Health Sciences and OpGen delivered positive surprises in the last four quarters, with an average beat of 23.97%, 7.96% and 4.5%, respectively.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>