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Why Should You Hold HCA Healthcare (HCA) in Your Portfolio?

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HCA Healthcare, Inc. (HCA - Free Report) has been gaining momentum on the back of its growth initiatives and cost-cutting measures for a while now.

Over the past 60 days, the company has witnessed its current-year earnings move 10.6% north. This upside instills investor confidence in the stock.

The company is well-poised for progress, evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

Its long-term growth rate stands at 12.3%, above the industry's average of 9.2%.

HCA Healthcare came up with an earnings surprise of 67.1%, on average, beating on the bottom line in three of the trailing four quarters while missing on the same in the remaining one.

Further, the company’s trailing 12-month return on equity (ROE) of 222% reflects its growth potential. It compares favorably with the industry average of 121.9%. Its ROE mirrors its efficiency in using its shareholders’ funds.

Now let’s see how this currently Zacks Rank #3 (Hold) company is an investor favorite.

It is constantly strategizing and capitalizing on telehealth medicine amid the COVID-19 scenario. With government rules in place, more and more people availed of telehealth care to contain the spread of the coronavirus. To expand its presence, the company also acquired a 40% interest in a telemedicine company.

The leading hospital company took up several cost-curbing initiatives like reduction in discretionary expenses, which is expected to aid margins.
Precisely, it devised a three-stage cost-reduction plan, and implemented the first-stage items and a few second-stage items in the second quarter.
After posting first-quarter results, HCA Healthcare updated its 2021 guidance. Management expects current-year revenues in the band of $54-$55.5 billion compared with the previous guidance of $53.5-$55.5 billion.

Adjusted EBITDA is forecast between $10.9 billion and $11.4 billion, up from the prior estimate of $10.3-$10.9 billion.

For 2021, the company’s EPS is expected to be $13.3-$14.3, up from the previous projection of $12.1-$13.1.

Moreover, its strategic initiatives led to an expansion in patient volumes and added several hospitals to its portfolio. The company’s acquisitions are expected to add scale to its business, thereby positioning it better to weather the regulatory uncertainties in the healthcare sector. During 2020, HCA Healthcare spent $568 million on acquiring hospitals and health care entities. It recently bought a 40% interest in a telemedicine company as well. Further, HCA Healthcare entered into an agreement to buy the home health and hospitals business of Brookdale Senior Living, which will likely close in the third quarter. This buyout is expected to expand services across the company’s networks and offer better enterprise capabilities. Additionally, the company expects to purchase two small hospitals in Nashville and Savannah.

Notably, it also agreed to divest its Redmond Regional Medical Center, GA to AdventHealth for around $635 million to boost financial solvency. This transaction will mark the company’s winding up of hospital operations in the surrounding regions of Atlanta. It also inked deals to sell four of its hospitals in Georgia for approximately $950 million to Piedmont Healthcare, a not-for-profit health system. The list includes Eastside Medical Center, Cartersville Medical Center, Coliseum Health System and Coliseum Center for Behavioral Health.  All the above measures are taken to drive the company’s liquidity position.

HCA Healthcare has also been frequently resorting to shareholder-friendly capital deployment through buybacks. In January 2021, the company raised its quarterly cash dividend by 11%. Its dividend yield stands at 0.9%, above the industry’s average of 0.7%.

Price Performance

Shares of this company have gained 110% in the past year, outperforming its industry’s growth of 105.8%. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

Zacks Investment ResearchImage Source: Zacks Investment Research

Some other stocks in the same space like MEDNAX Inc. (MD - Free Report) , Tenet Healthcare Corporation (THC - Free Report) and Community Health Systems, Inc. (CYH - Free Report) have also soared 77%, 258.9% and 424.4% each in the same time frame.

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