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HCA Healthcare Pre-Q3 Earnings: Healthy Buy or a Diagnosis to Wait?
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HCA Healthcare, Inc. (HCA - Free Report) is scheduled to report third-quarter 2024 results on Oct. 25, before the opening bell. The Zacks Consensus Estimate for third-quarter earnings per share of $4.97 indicates a 27.1% increase from the prior-year figure of $3.91.
Stay up-to-date with all quarterly releases: See ZacksEarnings Calendar.
The earnings estimate has witnessed upward revisions over the past 60 days. The consensus estimate for third-quarter revenues of $17.5 billion indicates 7.9% growth from the year-ago reported figure.
Image Source: Zacks Investment Research
HCA Healthcare beat the consensus estimate for earnings in three of the prior four quarters, missing once, with the average being 8.2%.
Our proven model predicts an earnings beat for HCA Healthcare this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat, which is precisely the case here.
Earnings ESP: HCA Healthcare has an Earnings ESP of +3.67%. This is because the Most Accurate Estimate is currently pegged at $5.15 per share, higher than the Zacks Consensus Estimate of $4.97. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
HCA Healthcare’s third-quarter revenues are likely to have benefited from rising patient volumes, occupancy rates and other associated metrics. Continued network expansion should have aided HCA in capturing rising patient volumes in the third quarter. As seniors have resumed elective procedures that were previously postponed due to pandemic-related constraints, these metrics are expected to benefit as a result. Coupled with rising revenue per equivalent admission, the growing volumes will continue boosting the hospital company’s top line.
An aging U.S. population, along with rising cases of diseases, is bound to boost the demand for hospital services. HCA Healthcare continues to increase its capabilities through strategic acquisitions to address that growing demand, which will support its volume.
Considering the third quarter, the Zacks Consensus Estimate for admissions indicates 4.6% year-over-year growth, while the same for equivalent patient days hints at a 3.7% increase. The consensus mark for revenue per equivalent admission indicates a 3.1% rise from the year-ago period. Additionally, the consensus estimate for Medicare and Medicaid revenues in the third quarter suggests 7.2% and 7.6% year-over-year increases, respectively. Better inpatient capacity management is expected to benefit the third-quarter results.
Improved payer mix is expected to have aided commercial volumes in the third quarter of 2024. As private insurance customers pay more than Medicare or Medicaid, better commercial volumes are likely to offset any negative impact due to the Medicaid redetermination process.
However, investors should keep in mind that rising patient volumes will also boost HCA’s expenses, especially in salaries and benefits, supply costs and other operating costs. This is likely to have trimmed its margins. For the third quarter of 2024, our model suggests a nearly 6% year-over-year increase in its total operating expenses.
Price Performance
HCA Healthcare stock has rallied 51.8% compared with the industry’s rise of 50.3% in the same time frame. It has also outperformed its sectorand the S&P 500 index which increased 6.8% and 22.9%, respectively, in the same period. Compared with HCA, Universal Health Services, Inc. (UHS - Free Report) , one of its peers, has gained 53.3% in the same time frame, while Acadia Healthcare Company, Inc. (ACHC - Free Report) has lost 31.6%.
HCA's YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value HCA Healthcare offers investors at current levels.
The company’s valuation looks a bit stretched compared with the industry average. Currently, HCA is trading at 16.78X forward 12 months earnings, slightly above the industry’s average of 16.29X, indicating investor confidence.
Image Source: Zacks Investment Research
Investor Considerations
HCA Healthcare continues to experience robust revenue growth, driven by increasing admissions, a comprehensive service suite, and a strong treatment network across the United States, with a 6.6% CAGR over the past decade (2013-2023). The recovery of elective procedures and strategic investments in clinical systems and digital capabilities support long-term growth, with 2024 revenues projected to rise 8.9% from 2023.
Inorganic growth through acquisitions, including urgent care centers and hospitals, expands HCA's footprint and patient volumes. Strong cash flow generation enables further acquisitions and shareholder value through buybacks and dividends.
Conclusion
Improving admissions, revenue per equivalent admissions, and better payer mix are likely to have offset the negative impact of rising expenses and Medicaid redeterminations, resulting in an earnings beat in the third quarter. An aging U.S. population is also expected to have made a positive impact on the demand for HCA’s services. This is expected to have been reflected in the third quarter results as well. Given these positive factors, long-term growth potential and another earnings beat around the corner, investors can consider buying HCA stock now.
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HCA Healthcare Pre-Q3 Earnings: Healthy Buy or a Diagnosis to Wait?
HCA Healthcare, Inc. (HCA - Free Report) is scheduled to report third-quarter 2024 results on Oct. 25, before the opening bell. The Zacks Consensus Estimate for third-quarter earnings per share of $4.97 indicates a 27.1% increase from the prior-year figure of $3.91.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The earnings estimate has witnessed upward revisions over the past 60 days. The consensus estimate for third-quarter revenues of $17.5 billion indicates 7.9% growth from the year-ago reported figure.
Image Source: Zacks Investment Research
HCA Healthcare beat the consensus estimate for earnings in three of the prior four quarters, missing once, with the average being 8.2%.
HCA Healthcare, Inc. Price and EPS Surprise
HCA Healthcare, Inc. price-eps-surprise | HCA Healthcare, Inc. Quote
Earnings Whispers
Our proven model predicts an earnings beat for HCA Healthcare this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat, which is precisely the case here.
Earnings ESP: HCA Healthcare has an Earnings ESP of +3.67%. This is because the Most Accurate Estimate is currently pegged at $5.15 per share, higher than the Zacks Consensus Estimate of $4.97. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: HCA Healthcare currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Key Factors Likely to Influence HCA’s Q3 Results
HCA Healthcare’s third-quarter revenues are likely to have benefited from rising patient volumes, occupancy rates and other associated metrics. Continued network expansion should have aided HCA in capturing rising patient volumes in the third quarter. As seniors have resumed elective procedures that were previously postponed due to pandemic-related constraints, these metrics are expected to benefit as a result. Coupled with rising revenue per equivalent admission, the growing volumes will continue boosting the hospital company’s top line.
An aging U.S. population, along with rising cases of diseases, is bound to boost the demand for hospital services. HCA Healthcare continues to increase its capabilities through strategic acquisitions to address that growing demand, which will support its volume.
Considering the third quarter, the Zacks Consensus Estimate for admissions indicates 4.6% year-over-year growth, while the same for equivalent patient days hints at a 3.7% increase. The consensus mark for revenue per equivalent admission indicates a 3.1% rise from the year-ago period. Additionally, the consensus estimate for Medicare and Medicaid revenues in the third quarter suggests 7.2% and 7.6% year-over-year increases, respectively. Better inpatient capacity management is expected to benefit the third-quarter results.
Improved payer mix is expected to have aided commercial volumes in the third quarter of 2024. As private insurance customers pay more than Medicare or Medicaid, better commercial volumes are likely to offset any negative impact due to the Medicaid redetermination process.
However, investors should keep in mind that rising patient volumes will also boost HCA’s expenses, especially in salaries and benefits, supply costs and other operating costs. This is likely to have trimmed its margins. For the third quarter of 2024, our model suggests a nearly 6% year-over-year increase in its total operating expenses.
Price Performance
HCA Healthcare stock has rallied 51.8% compared with the industry’s rise of 50.3% in the same time frame. It has also outperformed its sectorand the S&P 500 index which increased 6.8% and 22.9%, respectively, in the same period. Compared with HCA, Universal Health Services, Inc. (UHS - Free Report) , one of its peers, has gained 53.3% in the same time frame, while Acadia Healthcare Company, Inc. (ACHC - Free Report) has lost 31.6%.
HCA's YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value HCA Healthcare offers investors at current levels.
The company’s valuation looks a bit stretched compared with the industry average. Currently, HCA is trading at 16.78X forward 12 months earnings, slightly above the industry’s average of 16.29X, indicating investor confidence.
Image Source: Zacks Investment Research
Investor Considerations
HCA Healthcare continues to experience robust revenue growth, driven by increasing admissions, a comprehensive service suite, and a strong treatment network across the United States, with a 6.6% CAGR over the past decade (2013-2023). The recovery of elective procedures and strategic investments in clinical systems and digital capabilities support long-term growth, with 2024 revenues projected to rise 8.9% from 2023.
Inorganic growth through acquisitions, including urgent care centers and hospitals, expands HCA's footprint and patient volumes. Strong cash flow generation enables further acquisitions and shareholder value through buybacks and dividends.
Conclusion
Improving admissions, revenue per equivalent admissions, and better payer mix are likely to have offset the negative impact of rising expenses and Medicaid redeterminations, resulting in an earnings beat in the third quarter. An aging U.S. population is also expected to have made a positive impact on the demand for HCA’s services. This is expected to have been reflected in the third quarter results as well. Given these positive factors, long-term growth potential and another earnings beat around the corner, investors can consider buying HCA stock now.