U.S. markets closed
  • S&P 500

    -40.76 (-0.91%)
  • Dow 30

    -166.44 (-0.48%)
  • Nasdaq

    -137.96 (-0.91%)
  • Russell 2000

    +3.96 (+0.18%)
  • Crude Oil

    -0.65 (-0.90%)
  • Gold

    -2.80 (-0.16%)
  • Silver

    -0.43 (-1.90%)

    -0.0040 (-0.34%)
  • 10-Yr Bond

    +0.0390 (+2.93%)

    -0.0059 (-0.43%)

    +0.1770 (+0.16%)

    -506.82 (-1.04%)
  • CMC Crypto 200

    -32.05 (-2.62%)
  • FTSE 100

    -63.84 (-0.91%)
  • Nikkei 225

    +176.71 (+0.58%)

Zacks Industry Outlook Highlights: HCA Healthcare, Universal Health Services, Tenet Healthcare and Acadia Healthcare

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·9 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

For Immediate Release

Chicago, IL – June 23, 2021 – Today, Zacks Equity Research discusses Hospitals including HCA Healthcare, Inc. HCA, Universal Health Services, Inc. UHS, Tenet Healthcare Corporation THC and Acadia Healthcare Company, Inc. ACHC.

Link: https://www.zacks.com/commentary/1747385/4-hospital-stocks-to-gain-from-rising-admissions-aging-demography

After suffering weak patient volumes in 2020 due to COVID-led suspension of non urgent care procedures, things are now looking up for the Zacks Medical-Hospital industry. Patient admissions are coming back as the grip of coronavirus is loosening.

Stringent cost-control measures and government grants helped hospital companies hang on to the difficult times and minimized damages to a certain extent. Hospital companies are utilizing telehealth services to increase efficiency by reducing waiting time and lowering treatment costs.

Leading hospital companies like HCA HealthcareUniversal Health Services, Tenet Healthcare and Acadia Healthcare are set to benefit from these developments.

Industry Description

The Zacks Medical-Hospital industry comprises for-profit hospital companies that provide healthcare facilities through different types of hospitals, such as acute care, rehabilitation and psychiatric. These hospital entities are engaged in internal medicine, general surgery, cardiology, oncology, neurosurgery, orthopedics and obstetrics, mental health care, and diagnostic and emergency services among others.

Hospital revenues depend upon inpatient occupancy levels, the medical and ancillary services ordered by physicians and provided to patients and the volume of outpatient procedures. Hospital companies receive payments for patient services from the government under the Medicare program, Medicaid or similar programs, managed care plans (including plans offered through the American Health Benefit Exchanges), private insurers and directly from patients.

3 Hospital Industry Trends to Watch Out For

Volumes Revive as Covid Wanes:  Recovery of demand and deferred volume is visible in 2021, as the COVID intensity subsided. As more vaccines are provided, hospital companies are hopeful that patient volumes and results could strengthen through the year ahead.

Rating agency Moody's is of the view that patient volumes are expected to fully recover by late 2021 or early 2022. The rating agency also holds a stable outlook for the US for-profit hospital industry, which reflects EBITDA growth in the low-single digits over the next year or so as patient numbers gradually return to the pre-COVID levels.

Aging Population to Drive Industry Growth: As seniors account for an increasing percentage of the total U.S. population, we believe that demand for hospital services will continue to shoot up. According to the U.S. Census Bureau's revised (in 2020) census between 2016 and 2060, the number of individuals aged above 65 years are projected to be one of the fastest growing segments of the US population that climbed from 15% to 23%.

The Bureau expects this segment to surge approximately 92% to 75 million from the total U.S. population, which is projected to increase 25% during the same time period. This demographic change along with the rising incidence of diseases will drive the industry's growth.

Cost-Control Measures/Telehealth to Save Margins:  Hospital companies deepen focus on cost management to aid margins when revenue growth is still catching up. Companies are experiencing an upward pressure on labor costs due to challenges related to nurse staffing, which were caused mostly by COVID-related exigencies that saw a spike in the infection across most hospitals in the country.

Hospitals are utilizing the telehealth domain to heighten their efficiency by limiting the patients' waiting time and trimming their treatment costs. Industry leader HCA Healthcare is already using telehealth services in outpatient clinics, inpatient treatment, urgent care, and patient and employee monitoring.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Medical-Hospital industry is housed within the broader Zacks Medical sector. It carries a Zacks Industry Rank #133, which places it in the bottom 47% of 252 Zacks industries.

The group's  Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry's positioning in the bottom 47% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group's earnings growth potential.

Before we present a few stocks that you may want to consider, let's take a look at the industry's recent stock-market performance and its valuation picture.

Industry Outperforms S&P 500 & Its Sector

The Zacks Medical-Hospital industry has outperformed the Zacks S&P 500 composite as well as its own sector in the past year.

In the past year, the stocks in this industry have gained 106.6% compared with the S&P 500's rise of 39.2%. The Zacks Medical sector has gained 4.9% in the same time frame.

Industry's Current Valuation

On the basis of the trailing 12-month EV-to-EBITDA ratio, which is commonly used for valuing hospital stocks, the industry trades at 7.93X compared with the S&P 500's 17.1X and the sector's 9.86X.

Over the past five years, the industry has traded as high as 8.4X, as low as 5.27X and at a median of 7.58X.

4 Hospital Stocks to Keep an Eye On

Each of these stocks carries a Zacks Rank #3 (Hold) and witnessed an upward revision in 2021 earning estimates. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

HCA Healthcare.: The company provides services via surgery centers, free standing emergency rooms, urgent care centers and physician clinics.

The company's multiple buyouts helped it expand its patient volumes, enabled network expansion and added hospitals to its portfolio. The company also took cost-curbing measures, which will likely contribute to its margins. With increased uptake of telehealth medicine, the company expanded its telemedicine product offerings. Its solid capital position backs its growth strategies.

The Zacks Consensus Estimate for current-year earnings has been revised 10.9% upward to $14.15 over the past 60 days.

Earnings of the company surpassed estimates in three of the last four quarters (missed the mark in one), the average surprise being 67.08%

Universal Health Services:  It owns and operates (through its subsidiaries) acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers.

Higher admissions and patient days are steadily driving revenues. Acquisitions also played an instrumental role in building the company's growth trajectory by adding facilities, beds and hospitals to its business portfolio.

Its inorganic growth strategy will help it expand its domestic and international presence. Its balance sheet strength with adequate solvency level is impressive too.

Its shares have rallied 19% over the past six months. The Zacks Consensus Estimate for current-year earnings has moved 3.4% north to $10.96 over the past 60 days. The company's bottom line surpassed estimates in each of the last four quarters, the average being 135.7%.

Tenet Healthcare: The company owns and operates general hospitals and related healthcare facilities for urban and rural communities across numerous states.

It has been undertaking strategic divestitures for a while to get rid of its non-core and unprofitable business units for repaying debt and maintaining financial liquidity. Its inorganic growth on the back of accretive acquisitions and alliances remain commendable. Such initiatives primarily boost the company's scale of business and operating capacity, which poise it well for growth.

Its cost-containment program, which primarily comprises headcount reductions and renegotiation of contracts with suppliers and vendors, is likely to benefit its earnings.

The Zacks Consensus Estimate for 2021 earnings has been revised 14.6% upward to $5.26 over the past 60 days. The stock currently carries a Zacks Rank #3 (Hold) and its earnings surpassed estimates in each of the last four quarters, the average being 106.4%.

Acadia Healthcare: The company provides behavioral health care services  in the United States. Its top line has shown an improving trend over the years, driven by both organic and inorganic growth. It is well poised to fund new bed developments, given an impressive capital position.

Acadia Health's steady focus on acquisitions is expected to add scale to its business. It has been generating sufficient cash from operations over the years, which provides it with financial flexibility to pursue acquisitions and growth-driving projects.

Its shares have soared 84% over the past six months. The Zacks Consensus Estimate for current-year earnings has been revised 4.7% upward to $2.46 over the past 60 days. The stock carries a Zacks Rank of 3 at present. Earnings of the company surpassed estimates in each of the last four quarters, the average being 33.49%. 

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339



Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Universal Health Services, Inc. (UHS) : Free Stock Analysis Report
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report
Acadia Healthcare Company, Inc. (ACHC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research