HCA Holdings (HCA) Soars on Rising Outlook

Eileen Meng Lu |

HCA holdings, hospital, obamacare, cost of obamacare, ACA, affordable care act, Hospital stocks, hospital profits, HCA holdings stockHospital operator HCA Holdings Inc. (HCA) is up 10.4% Tuesday to $61.37 per share on Wednesday, July 16, after the hospital pre-announced stronger than expected 2014 second-quarter results. 

HCA posted $1.07 EPS at estimated $9.23 billion revenue, beating an estimate in a Thomson Reuters poll of analysts' of 91 cents per share on $8.86 billion revenue. The company revised its fiscal 2014 EPS guidance from previous year's $3.45-3.75 to $4.00-4.25 per share. 

The company is set to post 2014 Q2 earnings report on July 29. 

Affordable Care Act May Lift the EPS

Analysts from Wells Fargo and Gary Lieberman believed the revise of EPS was attributable to the Affordable Care Act.  

“We think it is possible more of the beat was due to healthcare reform; in which case it would appear that HCA’s increase in guidance for the year is rather conservative since that benefit will continue,” Wells Fargo analyst Gary Lieberman said.

Aside from Obamacare, $142 million that HCA received from the Texas Medicaid Waiver Program is also responsible for the upside. HCA admits the positive side of healthcare reform has brought in. 

"Results for the second quarter of 2014 exceeded our internal expectations, both in terms of our core operations and healthcare reform," HCA CEO R. Milton Johnson said in a release.

Since the U.S. Supreme Court ruled that the Affordable Care Act’s individual mandate was constitutional, stock in hospitals care companies is up. With the growing number of people insured thanks to ACA and the Medicaid expansion, hospitals face higher demand of already demanding patient care. Hospitals are going to reap more payments with many who previously didn't have the ability to pay medical bills now covered either by a new insurance plan or Medicaid. 

Many hospitals, including HCA, are trying to increase physician practices and open urgent care facilities. HCA holdings, the Nashville-based hospital, has spent more than $5 billion on expansion in freestanding emergency rooms, urgent care centers and surgery centers in the past three years. In the booking, HCA estimated a 1.2% growth in its same-facility admissions in the second quarter compared to the year-ago period. 

Comments on HCA boosted other hospital peers’ stocks. With higher-than-average trading volume, Community Health (CYH) , LifePoint Hospitals (LPNT) , Tenet (THC) , and Universal Health (UHS) also rose sharply on Wednesday. 

Solid Stock Performance

But some analysts pointed out that Obamacare did not necessarily drive the entire upside for HCA. Chris Rigg from Susquehanna Financial Group said increasing revenue is expected because of HCA's core business. HCA’s first-quarter result was not largely impacted by the healthcare reform, although HCA’s statement admitted the optimistic potential benefits. Looking at HCA Holdings' stock, there are no many significant spikes throughout years. But the company's case is more one of steady, solid stock performance.

With $24.55 billion market capitalization, HCA Holdings now operates 165 hospitals and 115 freestanding surgery centers in 20 states and England. 

 

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Companies

Symbol Name Price Change % Volume
THC Tenet Healthcare Corporation 15.43 0.08 0.52 1,482,613
LPNT LifePoint Health Inc. 55.05 0.35 0.64 375,393
HCA HCA Holdings Inc. 71.20 0.62 0.88 2,853,241
CYH Community Health Systems Inc. 5.73 0.22 3.99 2,815,339
UHS Universal Health Services Inc. 126.37 1.59 1.27 666,387
OTC.PR.A:AP OTC.PR.A:APH n/a n/a n/a n/a

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