HCA Healthcare (HCA) Hits 52 Week High: More Room for Upside?


On Aug 25, shares of HCA Healthcare, Inc. (HCA Quick QuoteHCA ) touched a 52-week high of $255.28 before closing the session a tad lower at $252.09.

The hospital company’s stock has increased 54.1% year to date, comparing favorably with the industry’s growth of 42.9%. Other companies in the same space, such as Universal Health Services, Inc. (UHS Quick QuoteUHS ) , Acadia Healthcare Company, Inc. (ACHC Quick QuoteACHC ) and Community Health Systems, Inc. (CYH Quick QuoteCYH ) have also gained 21.7%, 14.8% and 42.6%, respectively, in the same time frame.

Zacks Investment Research
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The company has been gaining from higher revenues on the back of solid patient volumes. Recovery in volumes and an overall bullish scenario in the sector helped it rally.

In the last reported quarter, its adjusted earnings of $4.37 per share beat the Zacks Consensus Estimate of $3.17 by 37.9%. The bottom line also improved 191.3% year over year on higher revenues.

The leading hospital company witnessed solid patient volumes in the quarter. The top line also improved 30.4% from the year-ago period’s figure. Concurrent to solid second-quarter results, the company updated its 2021 outlook. This should instill investor’s optimism in the stock.
Management expects current-year revenues in the band of $57-$58 billion, up from the prior guidance of $54-$55.5 billion.

Adjusted EBITDA is forecast between $12.1 billion and12.5 billion, up from the prior band of $10.9-$11.4 billion.
For 2021, the company’s EPS is expected to be $16.30-17.10, up from the prior estimate of $13.3-$14.3.

The currently Zacks Rank #2 (Buy) company managed to recover its revenues on the back of admissions this year. In the first six months of 2021, the company’s revenues increased 18.7% year over year. Total admissions in the same time frame increased 5.8% while revenues per equivalent admission rose 9.5% year over year. Volumes across all businesses grew in the first half of the year. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acquisitions have also contributed to the rally of the company over the years. Its inorganic growth strategies led to an increase in patient volumes enabled network expansion across several markets and added hospitals to its portfolio.

In the second quarter, it closed the Meadows Regional Hospital buyout in Vidalia, GA and expects to acquire two small hospitals in Nashville and Savannah. It also completed Brookdale Home Health and Hospice transaction in July.

HCA Healthcare’s balance sheet and cash flows (the company has generated increased free cash flow for the past several years) are impressive and offer the potential for accretive mergers and acquisitions alongside shareholder-friendly capital deployment through buybacks.

What’s Driving This Outperformance?

The company’s enhanced portfolio and strategic initiatives are likely to position it well for long-term growth. This hospital industry player is poised to benefit from rising volumes and outpatient surgeries.

HCA Healthcare’s trailing 12-month return on equity (ROE) of 234.3% reflects its solid profitability. It compares favorably with the industry average of 121.9%. Its ROE mirrors its efficiency in using its shareholders’ funds, which is an attractive proposition for investors.

It has 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.

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