Back to top

Image: Bigstock

Why is HCA Healthcare an Attractive Stock for Your Portfolio?

Read MoreHide Full Article

HCA Healthcare, Inc. HCA is well-poised for development on the back of healthy revenue stream and solid capital position.

In the third quarter of 2019, the company reported adjusted earnings of $2.23 per share, surpassing the Zacks Consensus Estimate by 4.2% and also increasing 3.2% year over year owing to higher revenues. Moreover, the top line shot up 10.9% from the year-ago period.

The company flaunts a stellar earnings surprise history, having outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 9.3%. This trend of estimate beats reflects the company’s operating efficiency.

Anthem is well-placed for growth, evident from its 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.

HCA Healthcare has been witnessing steady revenue growth, visible from its 2012-2018 CAGR of 5.9%. In the first nine months of 2019, the same was up 9.9% year over year, courtesy of volume growth across markets, service lines and its recent buyouts. The company still expects 2019 revenues in the band of $50.5-$51.5 billion, indicating the mid-point to be 9.4% above the 2018 reported figure. We expect this positive trend to continue, riding on the company’s efforts to enter large, fast-developing urban markets with growing population in constant need of such services.

Acquisitions always fueled growth for the company. Its inorganic growth strategies led to increased patient volumes, enabled network expansion across several markets and added hospitals to its portfolio. The company’s buyouts have great potential to add scale to its business, positioning it better to weather the regulatory uncertainties in the healthcare sector. In the first nine months of 2019, the entity purchased a seven-hospital health system in North Carolina and other nonhospital health care entities.

The company’s solid balance sheet is also impressive. The cash flows offer scope for accretive mergers and acquisitions alongside shareholder-friendly capital deployment through buybacks. In January 2019, HCA Healthcare raised its quarterly cash dividend by 14.3%, which instilled investor confidence in the stock.

The Zacks Consensus Estimate for current-year earnings is pegged at $10.51, suggesting an improvement of 7.6% from the year-ago reported number. Meanwhile, the consensus mark for revenues stands at $51.12 billion, indicating 9.5% growth from the prior-year reported figure.

For 2020, the Zacks Consensus Estimate for earnings stands at $11.63, hinting at 10.6% growth from the year-earlier reported figure. Further, the consensus mark for revenues is pegged at $53.74 billion, implying a 5.1% rise from the year-earlier reported figure.

Moreover, the stock has seen an upward revision in 2019 and 2020 earnings estimates over the past 30 days.

Zacks Rank & Other Stocks to Consider

HCA Healthcare carries a Zacks Rank #2 (Buy). Investors interested in the medical sector might also consider some other top-ranked stocks like Select Medical Holdings Corporation SEM, WellCare Health Plans, Inc. WCG and Genesis Healthcare, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Select Medical Holdings operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics and occupational health centers. In the trailing four quarters, the company’s average beat was 11.07%.

WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 17.32% in the preceding four quarters.

Genesis Healthcare operates skilled nursing facilities and assisted/senior living facilities. In the last four quarters, the company delivered average beat of 80.96%.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>