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HCA Healthcare (HCA) Up 53.3% 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, solid volumes and cost-cutting measures for a while now.

Shares of HCA Healthcare have soared 53.3% in a year compared with the industry’s rally of 38.5%.  It has a market capitalization of $78.3 billion.

Zacks Investment ResearchImage Source: Zacks Investment Research

The healthcare provider has a pleasing surprise history with earnings having surpassed estimates in all the trailing four quarters, the average being 21.67%.

HCA’s trailing 12-month return on equity (ROE) of 257.4% remains above the industry’s ROE of 142.9%. This highlights the tactical efficiency in utilizing its shareholder’s funds.

This presently Zacks Rank #3 (Hold) player 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.

HCA Healthcare has been witnessing solid patient volumes for many quarters now owing to rising admissions. The hospital entity recorded around $1 billion gain on sale of facilities in Georgia and other healthcare investments. HCA boasts a strong inorganic growth story. Its inorganic growth strategies led to an increase in patient volume enabled network expansion across several markets and added hospitals to its portfolio.

HCA Healthcare’s acquisitions are expected to add scale to its business. In 2019 and 2020, HCA paid a total of $1.7 billion and $568 million each in acquiring health care entities. HCA closed the Brookdale Home Health and Hospice transaction. In the second quarter of 2021, it concluded the Meadows Regional Hospital buyout in Vidalia, GA.

All these buyouts helped the player boost its portfolio and penetrate different geographies.

The hospital organization has been witnessing a surge in admissions, outpatient surgeries and other procedures for sometime now. In the first nine months of 2021, HCA Healthcare’s revenues increased 17.3% year over year. Total equivalent admissions in the same time frame increased 8.8% while revenues per equivalent admission rose 8.4% year over year. Volumes across all businesses grew in the first nine months.

HCA Healthcare is also steadily gaining from its telemedicine business line. Demand for telehealthcare is here to stay given the current situation and HCA is leaving no stone unturned to make the most of this business line. To expand its presence, HCA also acquired a 40% interest in a telemedicine company.

The leading hospital organization’s solvency level is also impressive, showing potential for accretive mergers and acquisitions alongside shareholder-friendly capital deployment through buybacks. Its cash flow provided by operating activities continues to be strong with the metric rising 12.4% and 21.4% year over year in 2019 and 2020, respectively.

Following solid third-quarter results, HCA Healthcare updated its 2021 outlook. Management expects current-year revenues in the band of $58.7-$59.3 billion, up from the previous guidance of $57-$58 billion.
Adjusted EBITDA is forecast between $12.5 billion and $12.8 billion, up from the prior projected range of $12.1-$12.5 billion.

For 2021, its EPS is expected to be $17.20-$17.80, up from the prior estimate of $16.30-17.10.

A solid guidance should instill investors’ confidence in the stock.

HCA currently comprises 183 hospitals and around 2000 ambulatory sites of care, including surgery centers, freestanding ERs, urgent care centers and physician clinics in 20 states and the United Kingdom.

Further Upside Left?

Time and again, the hospital player made efforts to bolster its portfolio.  
We believe that HCA Healthcare 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 HCA’s 2021 earnings indicates an improvement of 63.5% from the year-ago reported figure.

Stocks to Consider

Some better-ranked stocks in the medical sector are Molina Healthcare Inc. (MOH - Free Report) , NextGen Healthcare, Inc. (NXGN - Free Report) and AMN Healthcare Services (AMN - Free Report) .

With a Zacks Rank #2 (Buy) at present, Molina Healthcare Inc. is a multi-state managed care organization participating exclusively in government-sponsored healthcare programs. Its earnings beat the consensus mark in two of the trailing four quarters (while missing the mark in the remaining two), the average surprise being 4%.

NextGen Healthcare is a developer and marketer of healthcare information systems. With a Zacks Rank of 2 at present, NXGN has a trailing four-quarter surprise of 16%, on average.

AMN Healthcare Services is a travel healthcare staffing company with a Zacks Rank of 1 at present. It has a trailing four-quarter surprise of 19.51%, on average.

Shares of NextGen Healthcare have lost 4.1% in a year’s time, while the stocks of Molina and AMN Healthcare Services have rallied 53.4% and 76.6% each.