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Here's Why You Should Stay Away From HCA Healthcare Now

Zacks Equity Research

HCA Healthcare, Inc. HCA has been suffering for a while now due coronavirus-induced business loss.

The Zacks Consensus Estimate for the bottom line of $4.62 has moved 21.7% south over the past 30 days, indicative of analysts’ bearish sentiment on the stock.

Shares of this Zacks Rank #5 (Strong Sell) company have lost 11.4% in a year's time, narrower than its industry's decline of 14.6%.The price performance looks lackluster when compared to other companies in the same space, such as Community Health Systems, Inc. CYH, Tenet Healthcare Corporation THC, and Select Medical Holdings Corporation SEM, which have rallied 8.8%, 8.8% and 9%, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


So, what could have caused this cloud of pessimism around the stock?
The company witnessed a fall in its revenues since the middle of March as the pandemic required hospitals to halt their elective procedures to accommodate any potential spike in COVID-19 infected cases.

Cancellation in elective surgeries to make room for coronavirus-infected patients is hurting the company’s revenues. On its last earnings call, management stated that the company witnessed a respective year-over-year 30% and 50% decline in its in-patient admissions and emergency room visits through April. Its hospital-based outpatient surgeries also saw a 70% plunge from the prior-year quarter.

In the first quarter of 2020, HCA Healthcare reported adjusted earnings of $2.33 per share, missing the Zacks Consensus Estimate by 10.7%. Moreover, the bottom line declined 21.5% year over year due to lower patient volumes. Same facility equivalent admissions dipped 0.4% year over while same facility inpatient surgeries and same facility outpatient surgeries slid 1.8% and 5.9%, respectively, year over year due to the government-implemented rules to fight COVID-19.

Higher number of individuals without sufficient health insurance coverage might also result in bad debts for hospitals from unpaid medical bills.
The company even withdrew its 2020 outlook and suspended its dividend and share buyback program due to the current economic environment.

Apart from all these, the company has also been bearing exorbitant expenses for the past many years due to rising salaries and benefits, supplies plus other operating costs. In 2019 and the first three months of 2020, the same rose 10.2% and 6.8%, each, year over year. Going forward, the company is again expected to see a rise in costs due to its constant growth-related investments.

The company's 2020 earnings estimate stands at $4.62 while the same for current-year revenues is pegged at $47.38 billion, both implying a downside of 56% and 7.7% each from the year-ago reported figures.

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