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HCA Healthcare Up 30% in a Year: Will the Rally Sustain?

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HCA Healthcare, Inc. (HCA - Free Report) has been investors’ favorite with its consistent favorable operating earnings, strong inorganic growth, steady cash flow and further initiatives in place to grow in the years ahead.

This Zacks Rank #1 (Strong Buy) stock carries an impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best opportunities in the value investing space.

In a year’s time, the stock has rallied 30% compared with the industry’s growth of 14%.

This growth seems all the more attractive when compared with the price performance of other players in the industry like Tenet Healthcare Inc. (THC - Free Report) , Community Health Systems (CYH - Free Report) , and Universal Health Services, Inc. (UHS - Free Report) . Tenet Healthcare and Community Health Systems have plunged 44% and 11%, respectively, while Universal Health has gained 16.7%.You can see the complete list of today’s Zacks #1 Rank stocks here.

Till the first quarter of 2019, HCA grew same-facility inpatient admissions in 20 consecutive quarters. This growth has been an outcome of the investments made by the company to expand  network and improve clinical capabilities.  

The company has almost $4.3 billion of capital spending in its pipeline for the next few years. These investments will create additional inpatient and outpatient capacity within its local healthcare systems.

Furthermore, the integration of the acquired hospitals will drive growth. Recently, the company acquired 24 MedSpring Urgent Care Centers in Texas. HCA Healthcare is also expected to reap operating efficiencies via its investment in medical technologies like PatientKeeper, iMobile and vitals monitoring devices, which should lead to cost savings and better patient healthcare.

One distinct advantage for HCA Healthcare is its mammoth size, which gives it an edge in bargaining with payers (health insurers). This has aided margins and will continue to do so as the company is expanding through continuous acquisitions.

The company is financially healthy. It witnesses consistent cash flow generation that has allowed it to undertake capital expenditure plans and reap growth.

Labor issues, mainly the shortage of nurses, remain one of the major concerns for the company and the industry in general. To address this obstacle, the company recently became the majority owner of Galen College of Nursing. This association with Galen Health will allow HCA Healthcare to hone and develop necessary nursing skills. Effective nursing services are a key to keep operating costs of hospitals at bay.

The company has increased its 2019 guidance with adjusted EBITDA expected to range between $9.4 billion and $9.85 billion and earnings per share anticipated in the range of $9.80 and $10.40 per diluted share.

Strong earnings guidance along with a formidable business portfolio should favor the stock going forward.

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