HCA Healthcare (HCA) shares gained 11.4% on July 22 to close at $202.03 after the healthcare services company delivered blowout second-quarter results, significantly beating the Street’s earnings expectations.
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Based in the U.S., HCA Healthcare owns and operates 182 hospitals and approximately 2,200 ambulatory sites of care, including surgery centers, free-standing emergency rooms, urgent care centers, and physician clinics across the U.S. and the United Kingdom.
HCA’s Q2 Beat
The company reported stellar quarterly earnings of $4.21 per share, significantly higher than analysts’ estimates of $3.71 per share. However, it was lower than earnings of $4.37 per share reported for the prior-year period.
Furthermore, revenues jumped 2.6% year-over-year to $14.82 billion and exceeded consensus estimates of $14.73 billion.
On the downside, however, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin declined 180bps to 20.5% during the quarter.
Concurrent with the earnings, HCA announced a quarterly dividend of $0.56 per share, which is payable on September 30 to shareholders on record as of September 16.
HCA CEO’s Comments
HCA Healthcare CEO, Sam Hazen, commented, “Many aspects of our business were positive considering the challenges we faced with the labor market and other inflationary pressures on costs.”
Wall Street’s Take on HCA
Following the quarterly beat, Bank of America Securities analyst Kevin Fischbeck increased the price target on HCA Healthcare from $192 to $230 (13.84% upside potential) and reiterated a Buy rating.
Fischbeck was impressed by management’s confidence to manage the ongoing labor pressures and positive indications on recruiting and decreased contract labor expenses.
He further believes that anticipated labour cost growth in the mid-single digits should be able to be offset by commercial pricing driven by robust demand.
Turning to Wall Street, the analyst consensus is also optimistic about HCA Healthcare, with a Strong Buy rating based on 17 Buys, three Holds and one Sell. The average HCA Healthcare price target of $227.33 indicates an upside potential of 12.52%.
Bloggers Weigh In on HCA
TipRanks data shows that financial blogger opinions are 91% Bullish on HCA stock, compared to a sector average of 70%.
Concluding Thoughts
Shares of HCA Healthcare are down over 17% over the past year, underperforming benchmark indices, which are down 10%.
While management remains confident of managing higher costs, especially on the labor front, an accompanying growth in the bottom line will further boost investors’ confidence in the coming months.
