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3 Hospital Stocks to Buy as the Top-Ranked Industry Rebounds
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The year 2021 marks a comeback for the hospital industry, which suffered last year due to the pandemic. Revenues of the players in the Hospital industry came under pressure in 2020 when non-COVID patient admissions declined.
To accommodate a coronavirus patient, hospital facilities were directed to put elective medical procedures, non-essential medical, surgical and dental procedures on hold, which carry higher profit marginsThus the influx of COVID-19 patients pushed back non-pandemic admissions that dented earnings of the companies in the hospital sector.
On top of this, high expenses to comply with the COVID-19 norms including purchases of personal protective equipment (PPE), preparations for ICU and other costs weighed on the margins.
With widespread vaccination and restrictions mostly being lifted now, patients whose elective procedures and surgeries were withheld are visiting hospitals. This is also evident from the surge in non-coronavirus admissions for almost all players who posted revenues and earnings beat, this reporting cycle. Most participants upped their earnings guidance for the full year, indicating a favorable operating climate ahead.
Zacks Industry Rank Indicates Solid Prospects
The group’s Zacks Industry Rank which is basically the average of the Zacks Rank of all member stocks, indicates bright near-term prospects.
The Zacks Medical-Hospital industry currently carries a Zacks Industry Rank #26, which places it in the top 10% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance. Each of these companies carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Industry Outperforms Sector and the S&P 500
The Zacks Hospital Industry has outperformed the S&P 500 and its own sector over the past year.
While the stocks in this industry have collectively rallied 41.9%, the S&P 500 composite has increased 21.7%. During the same time period, the Zacks Medical sector has declined 1.1%.
Image Source: Zacks Investment Research
3 Hospital Stocks Worth Betting on
HCA Healthcare, Inc. (HCA - Free Report) , the leading hospital company in the United States with a market capitalization of $80 billion, is one of the players to gain from the strong rebound in demand for its services. In the first six months of 2021, same facility admission was up 5.8% against a decline of 56% recorded in the year-ago period. Revenue per equivalent admission also grew 9.5% compared with the 5.3% rise a year ago. Same-facility outpatient surgery cases too climbed 23.9%, mirroring the ascent in elective procedures.
Investors grew bullish on the stock, backed by the upward revision in the company’s 2021 financial guidance. Management expects revenues between $57 billion and $58 billion, adjusted EBITDA between $12.1 billion and $12.5 billion, and earnings per share between $16.30 and $17.10. The company’s business is set to expand with $3.8 billion of capital investment, scheduled for the 2021-2023 f. Its favorable cash flows and a continuous share buyback should support its earnings.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 16.67% upward over the past 30 days.
Despite the fact that the stock has soared 52% so far this year, it has enough potential to grow further.
Universal Health Services (UHS - Free Report) is the second leading hospital company after HCA Healthcare while the third place is held by Tenet Healthcare Corp. (THC - Free Report) on the basis of market capitalization. It reported higher revenues, admissions and patient days in both its segments, namely Acute Care and Behavioral Health.
Per management, the company for most part of the second quarter experienced a continued decline in the number of COVID-19 patients under treatment in its hospitals against a recovery in the number of non-COVID patients. As a result, most of its key volume metrics including acute and behavioral patient days, emergency room visits and surgical cases grew to roughly the pre-pandemic levels.
Capital expenditures, share repurchases lower debt level augur well for the stock. Hiked guidance for 2021 boosts optimism. Revenue is forecast in the $12.351-$12.501 billion band, which indicates 1.1-1.9% growth rate from the previous guidance of $12.125-$12.361 billion.
Adjusted EBITDA is envisioned at $1.883-$1.961 billion in 2021, up 6.1-8.4% from the prior outlook of $1.738-$1.849 billion. Adjusted EPS is projected between $11.46 and $12.16, implying 10-14% growth from the previous view of $10.05-$11.05.
Universal Health Services has gained 11% year to date and the stock is predicted to surge ahead.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 8% upward over the past 30 days.
Acadia Healthcare Company, Inc. (ACHC - Free Report) provides the behavioral healthcare treatment. The pandemic-led stress saw a spike in the number of people suffering mental health issues and substance use disorders. During the most recent reported quarter, its earnings and revenues surpassed estimates by 12.7% and 3.8%, respectively. The company continued with its beat streak for the seventh consecutive quarter.
Revenues gained from an increase in patient day and revenue per patient day. It reported solid volume trends with patient admission rising 6.9% in the first half of this year compared with the last year’s lukewarm scenario when admissions declined 0.6%.
An upbeat guidance for 2021 was another positive. Revenues are now estimated between $2.28 billion and $2.32 billion for 2021, up from the prior guidance of $2.24-$2.29 billion. Adjusted EBITDA is projected to be $530-$550 million, higher than the previous outlook of $500-$530 million. Adjusted earnings per share are forecast within $2.50-$2.70, up from the earlier view of $2.30-$2.55. Operating cash flows are expected to be $275-$310 million for this year.
The updated revenue guidance suggests 10% growth. This top-line growth is very solid compared with the respective 3.9% and 5.8% improvement achieved in 2020 and 2019. Acadia Healthcare’s growth strategy, which includes network expansion through addition of beds and setting up wholly-owned de novo facilities through strategic joint ventures and acquisitions, bodes well.
The stock has rallied 24.4% year to date and is poised to grow further.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 4.9% upward over the past 30 days.
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3 Hospital Stocks to Buy as the Top-Ranked Industry Rebounds
The year 2021 marks a comeback for the hospital industry, which suffered last year due to the pandemic. Revenues of the players in the Hospital industry came under pressure in 2020 when non-COVID patient admissions declined.
To accommodate a coronavirus patient, hospital facilities were directed to put elective medical procedures, non-essential medical, surgical and dental procedures on hold, which carry higher profit marginsThus the influx of COVID-19 patients pushed back non-pandemic admissions that dented earnings of the companies in the hospital sector.
On top of this, high expenses to comply with the COVID-19 norms including purchases of personal protective equipment (PPE), preparations for ICU and other costs weighed on the margins.
With widespread vaccination and restrictions mostly being lifted now, patients whose elective procedures and surgeries were withheld are visiting hospitals. This is also evident from the surge in non-coronavirus admissions for almost all players who posted revenues and earnings beat, this reporting cycle. Most participants upped their earnings guidance for the full year, indicating a favorable operating climate ahead.
Zacks Industry Rank Indicates Solid Prospects
The group’s Zacks Industry Rank which is basically the average of the Zacks Rank of all member stocks, indicates bright near-term prospects.
The Zacks Medical-Hospital industry currently carries a Zacks Industry Rank #26, which places it in the top 10% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance. Each of these companies carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Industry Outperforms Sector and the S&P 500
The Zacks Hospital Industry has outperformed the S&P 500 and its own sector over the past year.
While the stocks in this industry have collectively rallied 41.9%, the S&P 500 composite has increased 21.7%. During the same time period, the Zacks Medical sector has declined 1.1%.
Image Source: Zacks Investment Research
3 Hospital Stocks Worth Betting on
HCA Healthcare, Inc. (HCA - Free Report) , the leading hospital company in the United States with a market capitalization of $80 billion, is one of the players to gain from the strong rebound in demand for its services. In the first six months of 2021, same facility admission was up 5.8% against a decline of 56% recorded in the year-ago period. Revenue per equivalent admission also grew 9.5% compared with the 5.3% rise a year ago. Same-facility outpatient surgery cases too climbed 23.9%, mirroring the ascent in elective procedures.
Investors grew bullish on the stock, backed by the upward revision in the company’s 2021 financial guidance. Management expects revenues between $57 billion and $58 billion, adjusted EBITDA between $12.1 billion and $12.5 billion, and earnings per share between $16.30 and $17.10.
The company’s business is set to expand with $3.8 billion of capital investment, scheduled for the 2021-2023 f. Its favorable cash flows and a continuous share buyback should support its earnings.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 16.67% upward over the past 30 days.
Despite the fact that the stock has soared 52% so far this year, it has enough potential to grow further.
Universal Health Services (UHS - Free Report) is the second leading hospital company after HCA Healthcare while the third place is held by Tenet Healthcare Corp. (THC - Free Report) on the basis of market capitalization. It reported higher revenues, admissions and patient days in both its segments, namely Acute Care and Behavioral Health.
Per management, the company for most part of the second quarter experienced a continued decline in the number of COVID-19 patients under treatment in its hospitals against a recovery in the number of non-COVID patients. As a result, most of its key volume metrics including acute and behavioral patient days, emergency room visits and surgical cases grew to roughly the pre-pandemic levels.
Capital expenditures, share repurchases lower debt level augur well for the stock. Hiked guidance for 2021 boosts optimism. Revenue is forecast in the $12.351-$12.501 billion band, which indicates 1.1-1.9% growth rate from the previous guidance of $12.125-$12.361 billion.
Adjusted EBITDA is envisioned at $1.883-$1.961 billion in 2021, up 6.1-8.4% from the prior outlook of $1.738-$1.849 billion. Adjusted EPS is projected between $11.46 and $12.16, implying 10-14% growth from the previous view of $10.05-$11.05.
Universal Health Services has gained 11% year to date and the stock is predicted to surge ahead.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 8% upward over the past 30 days.
Acadia Healthcare Company, Inc. (ACHC - Free Report) provides the behavioral healthcare treatment. The pandemic-led stress saw a spike in the number of people suffering mental health issues and substance use disorders.
During the most recent reported quarter, its earnings and revenues surpassed estimates by 12.7% and 3.8%, respectively. The company continued with its beat streak for the seventh consecutive quarter.
Revenues gained from an increase in patient day and revenue per patient day. It reported solid volume trends with patient admission rising 6.9% in the first half of this year compared with the last year’s lukewarm scenario when admissions declined 0.6%.
An upbeat guidance for 2021 was another positive. Revenues are now estimated between $2.28 billion and $2.32 billion for 2021, up from the prior guidance of $2.24-$2.29 billion. Adjusted EBITDA is projected to be $530-$550 million, higher than the previous outlook of $500-$530 million. Adjusted earnings per share are forecast within $2.50-$2.70, up from the earlier view of $2.30-$2.55. Operating cash flows are expected to be $275-$310 million for this year.
The updated revenue guidance suggests 10% growth. This top-line growth is very solid compared with the respective 3.9% and 5.8% improvement achieved in 2020 and 2019. Acadia Healthcare’s growth strategy, which includes network expansion through addition of beds and setting up wholly-owned de novo facilities through strategic joint ventures and acquisitions, bodes well.
The stock has rallied 24.4% year to date and is poised to grow further.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 4.9% upward over the past 30 days.