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HCA, UHS to Report Q2 Earnings on Jul 25: Key Predictions

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The second-quarter earnings season is gathering momentum, with results from 87 members of the elite S&P 500 index on board.  Per the latest Earnings Preview, the performance of these index participants indicate a 20.9% increase in total earnings on 10.3% higher revenues. The beat ratio is impressive with 86.2% companies surpassing bottom-line expectations and 77% outperforming on the top line.

Based on the observed pattern, second-quarter 2018 is anticipated to register healthy double-digit percentage earnings growth on a year-over-year basis.  

The report also states that overall second-quarter earnings for all the S&P 500 companies are expected to be up 21% on 8.3% growth in revenues. This represents an almost similar growth projection from the previous quarter, which recorded 24.6% earnings growth on 8.7% higher revenues, keeping in mind that actual results typically exceed estimates by 3-5%. Experts widely believe that earnings growth is likely to improve steadily until the end of 2019, as businesses gain from a lower tax rate.

The Medical sector, of which Hospital industry is part, however, looks somewhat less profitable. For the sector, earnings are expected to improve 9.1% year over year while revenues are touted to rise 6.4% compared with earnings and revenue growth of 13.8% and 7.2% achieved in the first quarter of 2018.

Let’s take a sneak peek at two major Hospital stocks scheduled to report second-quarter earnings on Jul 25 to see how things are shaping up for the upcoming results.

Universal Health Services, Inc. (UHS - Free Report) is scheduled to release results after market close. The company has likely witnessed consistent solid performances by both its Acute Care and Behavioral Health segments. The upside is attributable to rising admissions, licensed beds and patient days.
The Zacks Consensus Estimate for total revenues in the second quarter is pegged at $2.7 billion, reflecting year-over-year growth of 4%. The consensus estimate for net revenues at Acute Care and Behavioral Health segments stands at $1.4 billion and $1.2 billion, respectively, up 4.8% and 2.2% year over year.

The average number of licensed beds in the Acute Care hospitals and Behavioral Health centers has been steadily increasing since 2012. The consensus mark for Average Licensed Beds in Acute Care and Behavioral Health on same facility basis is pegged at respectively 6.4 billion and 23.2 billion, up 8.5% and 6% year over year.

The increasing bed count is likely to drive admissions in both the segments in the to-be-reported quarter. Per our estimates, Admissions in Acute Care and Behavioral Health on same facility basis is 75.8 billion and 122.1 billion, up 6% and 2.7%, respectively, year over year.

For the to-be-reported quarter, the company currently has an Earnings ESP of +0.73% and a Zacks Rank #4 (Sell), making earnings surprise prediction difficult. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 for a likely earnings beat. (Read more: What's in Store for Universal Health's Q2 Earnings?).

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

HCA Healthcare Inc. (HCA - Free Report) is scheduled to release results before the opening bell. The company will likely witness an increase in revenues in the second quarter, continuing with the trend over the past few quarters. This growth is likely to be driven by higher facility admissions and equivalent admissions, surgical growth and same facility emergency room growth. The Zacks Consensus Estimate for the company’s second-quarter top line is pegged at $11.3 billion, up 5.4% from the year-ago quarter.

Its bottom line may be weighed down by escalating costs for workforce development and other investments.

Nonetheless, lower tax rates owing to the Tax Cuts and Jobs Act are likely to reduce the company’s tax burden, boosting its bottom line in turn. (Read more: What's in the Cards for HCA Healthcare in Q2 Earnings?).

We remain inconclusive about an earnings beat this quarter as HCA Healthcare has an ESP of -0.14% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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