HCA Holdings’s 4Q15 Earnings: What Investors Should Know
HCA Holdings Posts Strong Earnings Results in 4Q15
4Q15 takeaways
HCA Holdings (HCA) posted its 4Q15 earnings on January 28, 2016. The company registered diluted EPS (earnings per share) attributable to common shareholders of about $1.7 in 4Q15 and $5.6 for full-year 2015.
As the above chart shows, HCA Holdings’s diluted EPS in 4Q15 surpassed Wall Street analysts’ expectations by $0.29. The company benefited from the increase in total admissions. It benefited from improvements in service mix, payer mix, and cost management in 4Q15.
In 4Q15, the company earned ~$10.3 billion in revenue—a rise of 6.4% on a YoY (year-over-year) basis. HCA’s net profit margin rose by 0.7% YoY. It reached 6.8% in 4Q15. HCA Holdings’s revenue was $39.7 billion in full-year 2015—7.5% YoY growth. Peers including Universal Health Services (UHS), LifePoint Hospitals (LPNT), and Community Health Systems (CYH) are expected to report revenue of about $9.0 billion, $5.2 billion, and $19.6 billion, respectively.
Stock price movement
After the release of its third quarter earnings results on October 27, 2015, HCA Holdings’s share price fell gradually from $68.8. It reached $65.1 on November 12, 2015. The company failed to meet Wall Street analysts’ EPS estimates by $0.03 in 3Q15. The share price rose to $70.8 on November 18, 2015.
On November 19, 2015, UnitedHealth Group downgraded its 2015 guidance. It attributed the losses to poor performance in the public exchange business. Investors feared that other health insurance companies could have suffered from the Affordable Care Act compliant public exchange business. This would lead to a low number of total enrollments. Hospital companies witness higher profit margins during periods of strong growth in the total health insurance enrollments. It leads to lower bad debt expenses for these companies. As a result, HCA Holdings’ share price suffered. Investors were concerned about the decline in the company’s profit margins. To learn more about hospital companies’ bad debt expenses, read Understanding hospitals’ bad debt expenses and profitability.
HCA Holdings’s share price only recovered when other health insurance companies released statements assuring investors that their performance in the public exchange segment continued to meet previous estimates. The company witnessed a decline in the share price on December 3, 2015, due to depressed investor sentiments. Key insider Michael S. Cuffe, the president of Physician Services, sold 2,575 of HCA’s shares.
HCA Holdings’s share price has been on an upward trend since January 19, 2016, when UnitedHealth Group posted earnings results and emphasized its strong enrollment growth. The stock price benefited from HCA Holdings’s stellar performance in 4Q15. It’s being touted as a record quarter for the company.
You can also invest in the SPDR S&P 500 ETF (SPY) and reduce excessive company-specific risks of investing directly in HCA Holdings. HCA Holdings accounts for about 0.13% of SPY’s total holdings.
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