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Why Adding HCA Healthcare to Your Portfolio Makes Sense

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HCA Healthcare, Inc. (HCA - Free Report) is well-poised for growth on the back of strategic initiatives, robust capital position and solid revenues.

The company has an impressive Value Score of A and a Growth Score of B and this style score analyzes its growth prospects.

It flaunts a commendable earnings surprise history, having surpassed ed the Zacks Consensus Estimate in the trailing four quarters, the average being 15.74%. This appreciative surprise record underscores the company’s operational efficiency.

The company’s return on assets — a profitability measure — comes in at 9.3%, above its industry average of 6.9%.

HCA Healthcare recently delivered first-quarter 2019 adjusted earnings of $2.97 per share, surpassing the Zacks Consensus Estimate by 28.6%. The same also rose 27.5% year over year owing to higher admissions and solid revenues.

Its growing top line, on the back of an increase in same facility admissions and equivalent admissions, same facility emergency room growth and surgical growth, is evident from its six-year (2012-28) CAGR of 5.9%.

In the first quarter, the revenues were up 9.6% year over year, banking on volume growth in commercial business and other complex services along with new acquisitions. We expect this trend to continue, given the company’s efforts to enter large, fast-developing urban markets with the growing population in constant need of its services.

The company’s solid balance sheet and cash flows are also impressive. The same offers potential for accretive mergers and acquisitions alongside shareholder-friendly capital deployment through buybacks.

HCA Healthcare has been emphasizing on buyouts for expedited growth. Its inorganic growth strategies led to an increase in patient volumes enabled network expansion across several markets and added hospitals to its portfolio. The company’s consolidations are thus expected to add scale to its business, positioning it better to weather the regulatory uncertainties in the healthcare sector.

In addition to hospital acquisitions, HCA Healthcare’s multi-year investments in medical technologies like PatientKeeper, iMobile and vitals monitoring devices, have moved out of the respective pilot phases and are now being deployed across the company.

We expect HCA Healthcare to continue investing in the market brands to better coordinate services among these diverse points of care, which should pave the way for long-term growth. All these initiatives should help the company boost its portfolio as well as penetrate further new geographies.

The company is well-placed for growth, evident from its attractive 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 current-year earnings is pegged at $10.38, indicating an increase of 6.2% from the year-ago reported figure on revenues of $50.9billion, which again implies a 9.2% climb from the prior-year reported number.

For 2020, the Zacks Consensus Estimate for earnings stands at $11.3 on $53.4 billion revenues, suggesting a respective 8.8% and 4.8% improvement from the year-earlier reported figures.

Shares of this Zacks Rank #2 (Buy) company have rallied 23.8% in a year's time, outperforming its industry’s rise of 8.8%.


Stocks to Consider


Investors interested in the medical sector can take a look at some other top-ranked stocks like The Joint Corp. (JYNT - Free Report) , Molina Healthcare, Inc (MOH - Free Report) and WellCare Health Plans, Inc. (WCG - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Joint Corp. develops, owns, operates, supports and manages chiropractic clinics. In the last four quarters, the company delivered average beat of 190%. It sports a Zacks Rank #1.

Molina offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. It carries a Zacks Rank #2 (Buy). In the trailing four quarters, the company came up with average beat of 88.17%.

WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 13.52% in the preceding four quarters. It has a Zacks Rank of 2.

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