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Here's Why You Should Stay Away From HCA Healthcare Now
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HCA Healthcare, Inc. (HCA - Free Report) has been suffering for a while now due to coronavirus-induced business loss. It is needless to say that it was affected by a decline in elective procedures, which dried up its revenues. Moreover, its weak balance sheet also raises concern.
The Zacks Consensus Estimate for 2021 bottom line of $11.46 has moved 0.1% south over the past seven days, indicative of analysts’ bearish sentiment on the stock.
Although patient admission volumes have been slowly bouncing back, the company's performance remains a concern for investors.
Shares of this currently Zacks Rank #4 (Sell) company have gained 10.9% in a year's time against the industry's decline of 1.5%.
Other companies in the same space, such as Tenet Healthcare Corporation (THC - Free Report) , Community Health Systems Inc. (CYH - Free Report) and Acadia Healthcare Company Inc. (ACHC - Free Report) have also rallied 27.8%, 25% and 7.5% each in the same time frame.
So, what could have caused this cloud of pessimism around the stock?
The company witnessed a fall in its revenues since the middle of March as the pandemic required hospitals to halt their elective procedures to accommodate any potential spike in the COVID-19 infected cases. The company suspended its dividend and share buyback programs due to the current economic environment.
In the second quarter, the bottom line declined due to lower admissions. Same facility inpatient surgeries and same facility outpatient surgeries also slid in the last reported quarter due to the government-implemented rules to fight the COVID-19 outbreak.
The company even withdrew its guidance because of the uncertainty triggered by the prevalent pandemic with decline in same facility emergency room visits, same facility in-patient surgeries as well as hospital-based outpatient surgeries, etc. In the first six months of 2020, admissions decreased 5.6% year over year while revenues fell 4.7% year over year. In the same time frame, emergency room visits dropped 16.7% year over year.
The company’s solvency position also remains a concern. Its leverage ratio (total debt to total capital) of 98.2% is higher than the industry average of 94.8%. Its interest expense has also been rising over the last several quarters. In 2018 and 2019, the metric inched up 3.8% and 3.9% each year over year.
As of Jun 30, 2020, the company had $30 billion of total debt, higher than $7.7 billion of capacity under its credit facilities and $4.6 billion of cash on the balance sheet. The company's high debt and low interest payment capacity raise its financial risk.
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Here's Why You Should Stay Away From HCA Healthcare Now
HCA Healthcare, Inc. (HCA - Free Report) has been suffering for a while now due to coronavirus-induced business loss. It is needless to say that it was affected by a decline in elective procedures, which dried up its revenues. Moreover, its weak balance sheet also raises concern.
The Zacks Consensus Estimate for 2021 bottom line of $11.46 has moved 0.1% south over the past seven days, indicative of analysts’ bearish sentiment on the stock.
Although patient admission volumes have been slowly bouncing back, the company's performance remains a concern for investors.
Shares of this currently Zacks Rank #4 (Sell) company have gained 10.9% in a year's time against the industry's decline of 1.5%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other companies in the same space, such as Tenet Healthcare Corporation (THC - Free Report) , Community Health Systems Inc. (CYH - Free Report) and Acadia Healthcare Company Inc. (ACHC - Free Report) have also rallied 27.8%, 25% and 7.5% each in the same time frame.
So, what could have caused this cloud of pessimism around the stock?
The company witnessed a fall in its revenues since the middle of March as the pandemic required hospitals to halt their elective procedures to accommodate any potential spike in the COVID-19 infected cases. The company suspended its dividend and share buyback programs due to the current economic environment.
In the second quarter, the bottom line declined due to lower admissions. Same facility inpatient surgeries and same facility outpatient surgeries also slid in the last reported quarter due to the government-implemented rules to fight the COVID-19 outbreak.
The company even withdrew its guidance because of the uncertainty triggered by the prevalent pandemic with decline in same facility emergency room visits, same facility in-patient surgeries as well as hospital-based outpatient surgeries, etc. In the first six months of 2020, admissions decreased 5.6% year over year while revenues fell 4.7% year over year. In the same time frame, emergency room visits dropped 16.7% year over year.
The company’s solvency position also remains a concern. Its leverage ratio (total debt to total capital) of 98.2% is higher than the industry average of 94.8%. Its interest expense has also been rising over the last several quarters. In 2018 and 2019, the metric inched up 3.8% and 3.9% each year over year.
As of Jun 30, 2020, the company had $30 billion of total debt, higher than $7.7 billion of capacity under its credit facilities and $4.6 billion of cash on the balance sheet. The company's high debt and low interest payment capacity raise its financial risk.
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The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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