On Jan 6, 2013, shares of HCA Holdings, Inc. (HCA) reached a new 52-week high of $49.67. The momentum was driven by continued solid performance by the company, strong financial position, increased patient encounters by the company and a raised guidance.
With respect to earnings trend, this healthcare service providing company witnessed positive earnings surprises in two of the last four quarters, with an average beat of 2.7%. In the last reported quarter, earnings successfully met the Zacks Consensus Estimate and improved year over year.
The company undertook a number of clinical and operating initiatives that contributed to this improvement. HCA Holdings’ top line rose 4.9% year over year to $8.46 billion, beating the Zacks Consensus Estimate by 0.5%, driven by higher volume and revenue per equivalent admission.
HCA Holdings has been consistent in providing high quality yet affordable patient care to individuals across the nation. This has helped the company gain patient encounters over time. The contract signed with Florida’s Blue Cross and Blue Shield company, Florida Blue last months represents this agenda of the company. We expect this deal to increase patient outcomes and thus bolster company growth going forward. The long-term growth rate for this stock is 12%.
HCA Holdings has also been intent in returning more value to its shareholders. In Nov 2013, the company repurchased shares worth $500 million. Concurrently, the company stated that the 2013 adjusted EBITDA will lie near the upper end of the previously announced guidance range of $6.25-$6.50 per share. The 1-year return from the stock is 51.9%, higher than the S&P 500’s estimated return of 24.6%.
The company is also investing in ventures that would expand its capabilities as a hospital service provider. To expand its operations and enhance core efficiencies, HCA Holdings inked a deal with IASIS Healthcare LLC to purchase three Tampa Bay hospitals -- Palms of Pasadena Hospital, Memorial Hospital of Tampa and Town & Country Hospital. This deal is pending regulatory approval and should enhance company operations in the Tampa Bay and St. Petersburg area.
However, valuation looks stretched for HCA Holdings. This is because, although the shares are trading at a discount to the peer group average, both on a price-to-book basis and forward price-to-earnings basis, the return on equity is negative.
HCA Holdings currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Acadia Healthcare Company, Inc. (ACHC), VCA Antech Inc. (WOOF) and Mednax Inc. (MD). All these stocks carry a Zacks Rank #2 (Buy).