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Is a Beat in Store for HCA Healthcare (HCA) Q4 Earnings?

Zacks Equity Research

HCA Healthcare, Inc. HCA is scheduled to release fourth-quarter 2018 results on Jan 29. In the last reported quarter, the company delivered a positive earnings surprise of nearly 11.9%.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at $2.59, which translates into a year-over-year growth of 22.2%.

Continuing with this trend over the last several quarters, HCA Healthcare’s total revenues are likely to have witnessed a rise in the fourth quarter of 2018. The consensus mark for the company’s revenues in the period under review stands at $12.1 billion, up 5.2% year over year. This upside should be driven by admissions, same store admissions and equivalent admissions.

The Zacks Consensus Estimate for patient days is also up by 2.9% from the year-ago quarter. Moreover, the Zacks consensus mark for total number of licensed beds is also up by 1.2% year over year.

The company is expected to enjoy a free cash flow, which has been consistent over the past several quarters. This in turn, offers a good potential for active mergers and acquisitions.

However, we expect an increase in expenses because of the company’s growth-related investments and operating costs. Higher expenses should also weigh on the company’s margins.

We also expect the company's leverage to remain at elevated levels as it takes on debt to finance its acquisitions.

What the Quantitative Model States

Our proven model conclusively shows that HCA Healthcare is likely to beat on earnings this to-be-reported quarter. This is because the stock needs to have the right combination of a positive Earnings ESP as well as a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you can see below.

Earnings ESP: HCA Healthcare has an Earnings ESP of +2.09%. This is because the Most Accurate Estimate is pegged at $2.65, higher than the Zacks Consensus Estimate of $2.59. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

HCA Healthcare, Inc. Price and EPS Surprise

HCA Healthcare, Inc. Price and EPS Surprise | HCA Healthcare, Inc. Quote

Zacks Rank: HCA Healthcare sports a Zacks Rank of 1, which increases the predictive power of ESP. Further, a positive ESP significantly raises the odds of a likely earnings surprise.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the medical sector with the perfect combination of elements to also surpass estimates in the next releases are as follows:

Universal Health Services, Inc. UHS is slated to release fourth-quarter earnings figures on Feb 27. This stock has an Earnings ESP of +2.49% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mednax, Inc MD has an Earnings ESP of +0.12%. This #3 Ranked company is set to report fourth-quarter earnings on Feb 7.

Molina Healthcare, Inc MOH is set to report fourth-quarter 2018 earnings performance on Feb 11. The stock has an Earnings ESP of +2.89% and is a Zacks #1 Ranked player.

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