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What's in Store for HCA Healthcare's (HCA) Q1 Earnings?

Zacks Equity Research

HCA Healthcare, Inc. HCA is scheduled to release first-quarter 2019 results on Apr 30. In the last reported quarter, the company delivered a positive surprise of nearly 15.4%, backed by higher same facility admissions. Moreover, the bottom line shot up nearly 41% year over year.

Let’s see, how things are shaping up prior to this announcement.

A likely increase in beds, admissions and patient days should aid revenue growth in the to-be-reported quarter. The Zacks Consensus Estimate for first-quarter revenues stands at $12.3 billion, indicating 7.8% growth from the year-ago reported figure. The Zacks Consensus Estimate for equivalent admissions is pegged at 879 million, implying3.5% increase from the year-earlier quarter’s reported figure. This uptick would likely be backed by the company’s network expansion.

The Zacks Consensus Estimate for patient days has also been revised 2.7% upward from the year-ago quarter’s reported figure. Moreover, the consensus mark for weighted average licensed beds has moved2.4% north from the prior-year’s reported number.

The consensus estimate for the total number of hospitals is likely to be raised2.2% from the reported tally in the same period last year.

The company might have been consistent with capital deployment, which should further favor its bottom line.

HCA Healthcare has likely witnessed a steady cash flow in the first quarter, retaining the momentum over the last several quarters.

However, the Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at $2.31, suggesting a 0.9% dip from the year-ago reported figure. This downside is most likely due to higher expenses because of the company’s growth-related investments and operating costs. Higher expenses should also weigh on the company’s margins.

Further, we expect the company's leverage ratio to persistently deteriorate as it incurs more debt to finance its acquisitions.

What the Quantitative Model States

The proven Zacks model does not conclusively show 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 and 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 -1.84%. This is because the Most Accurate Estimate is pegged at $2.27, lower than the Zacks Consensus Estimate of $2.31. 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 has a Zacks Rank #3, which increases the predictive power of ESP. However, a negative ESP lowers the chances of an earnings beat as only a positive value in the combination can significantly increase the investor confidence about a likely positive surprise. Thus, surprise prediction is left inconclusive here for the stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Stocks to Consider

Some stocks worth considering from the medical sector with the perfect mix of elements to surpass estimates this earnings season are as follows:

Aduro Biotech, Inc. ADRO is slated to release first-quarter earnings figures on May 1. This stock has an Earnings ESP of +82.00% and a Zacks Rank #2.

bluebird bio, Inc. BLUE has an Earnings ESP of +12.12% and a Zacks Rank of 3. The company is set to report first-quarter earnings on May 1.

Humana Inc. HUM has an Earnings ESP of +0.84% and a Zacks Rank of 3. The company is set to report first-quarter earnings on May 1.

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