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HCA Healthcare (HCA) Up 109.5% in a Year: More Room to Run?

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

Shares of the company have soared 109.5% in a year compared with the  industry’s rally of 96%.  It has a market capitalization of $80.61 billion.

Zacks Investment ResearchImage Source: Zacks Investment Research

Other companies in the same space, such as Acadia Healthcare Company, Inc. (ACHC - Free Report) , Community Health Systems, Inc. (CYH - Free Report) and Universal Health Services, Inc. (UHS - Free Report) have gained 128.8%, 181.2% and 40.1% in the same time-frame.

Over the past seven days, the stock has witnessed its current-year earnings move 0.3% north. This upside instills investor confidence in the stock.

The healthcare provider has a pleasing earnings surprise history. Its earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 11.65%.

The company’s trailing 12-month return on equity (ROE) of 234.4% remains above the industry’s ROE of 131.6%. This highlights the tactical efficiency in utilizing its shareholder’s funds.

This presently Zacks Rank #2 (Buy) company boasts a strong inorganic growth profile. The healthcare provider’s numerous acquisitions, rising admissions, diversified business and capital deployment should drive long-term growth. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It gained from solid patient volumes in the last reported quarter. Following strong second-quarter results, the company updated its 2021 outlook. Management expects current-year revenues in the band of $57-$58 billion, indicating growth from the prior guidance of $54-$55.5 billion.

Adjusted EBITDA is forecast between $12.1 billion and12.5 billion, suggesting a rise from the prior band of $10.9-11.4 billion.

For 2021, the company’s EPS is expected to be $16.30-17.10, implying an increase from the prior estimate of $13.3-$14.3.

A bullish guidance should raise investors’ optimism on the stock.

HCA Healthcare’s inorganic growth strategies led to higher patient volumes, which enabled network expansion across several markets and added hospitals to its portfolio. The company’s acquisitions are expected to add scale to its business. During 2020, HCA Healthcare spent $568 million on acquiring hospitals and health care entities. The same closed the Brookdale Home Health and Hospice transaction.

In the second quarter, it concluded the Meadows Regional Hospital buyout in Vidalia, GA. The company expects to acquire two small hospitals in Nashville and Savannah. Its series of buyouts have helped it boost its portfolio over time, contributing to its overall growth.

The company is bouncing back owing to a surge in admissions, and outpatient surgeries and other procedures. In the first six months of 2021, its revenues improved 18.7% year over year. Total admissions in the same time frame climbed 5.8% while revenues per equivalent admission rose 9.5% year over year. Outpatient surgery cases in the first half of the year jumped 24.2% year over year while emergency room visits ascended 5%. Volumes across all businesses grew in the first half of the year.

This healthcare company has an impressive solvency level. Its cash flow position is encouraging and is perfect for accretive mergers and acquisitions alongside shareholder-friendly capital deployment through buybacks. Its cash flow provided by operating activities continues to be sturdy with the metric rising 12.4% and 21.4% year over year in 2019 and 2020, respectively.

Further Upside Left?

Time and again, the hospital company made efforts to bolster its portfolio.  
We believe that the company is well-poised for growth on the back of its various initiatives.

The stock carries a VGM Score  of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
 
The Zacks Consensus Estimate for the company’s 2021 earnings indicates an improvement of 53.98% from the year-ago reported figure.