Happy Thanksgiving! Save 50% on Your MarketBeat All Access Subscription.
  •  days
  •  Hours
  •  Minutes
  •  Seconds
×
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother

Can HCA Healthcare Weather the Normalization?

Key Points

  • Normalization is a fact despite HCA Healthcare’s massive scale.
  • The slowdown from the post-pandemic slingshot recovery has begun.
  • Medicare sequestration reimbursement cuts will affect earnings moving forward.

Can HCA Healthcare Weather the Normalization? Hospital and healthcare facilities operator HCA Healthcare (NYSE: HCA) stock has fallen (-25%) this year underperforming the payors. Apparently, not all healthcare stocks are a safe haven in a falling market fueled  by recession fears. The payors including health insurance companies like Humana (NYSE: HUM), Aetna (NYSE: CVS), UnitedHealthcare Group (NYSE: UNH), and Cigna (NYSE: CI) are all still trading up for 2022. This could be due to the vertically integrated healthcare evolution as payors merge with providers to create their own self-contained healthcare ecosystems. HCA is the world’s largest hospital owner and operator with 182 hospitals, and nearly 2,200 ambulatory sites of care including surgery centers, freestanding emergency rooms, urgent care facilities, and physician clinics.

HCA Kryptonite Operator

HCA is not only a pureplay healthcare provider, but it happens to dominate in the one area that integrated healthcare systems don’t want to own, hospitals. Hospitals are the Kryptonite of the healthcare industry from a profitability standpoint. Most hospitals in the U.S. are classified as non-profit organizations because they are notorious for losing money. They write off about 70% of what they bill out. However, the massive scale and a world class management has made HCA Healthcare one of the most profitable healthcare providers on the planet. Despite the bite of inflationary pressures and labor costs, HCA managed to generate nearly $1.15 billion in net income in its latest quarter. However, growth is starting to wane after the post-pandemic recovery period as rising inflation also hits hospital costs. Additionally, the Medicare sequestration cuts rose to (-2%) on July 2022 which essentially reduces provider reimbursements as hospitals are estimated to lose (-$3 billion) according to the America Hospital Association (AHA).   


Thriving after the Pandemic

During the pandemic, hospitals faced steep drops in revenues as inpatient and elective surgeries were put on hold due to the spread of COVID-19. Covid patients were moved to the top priority for emergency rooms which quickly ran out of space. The federal government subsidized some of the losses, but many community hospitals went bankrupt. As the reopening got underway and social distancing mandates were lifted, hospitals saw a spike in business as those previously delayed surgeries and treatments once again resumed. The pent-up demand made the financially fortified hospitals even more money on the slingshot like recovery. The reversion back to normal has kicked in for 2022.

The Slowdown Has Begun

On July 22, 2022, HCA Healthcare reported its fiscal Q2 2022 earnings for quarter ended June 2022. The Company reported an earnings-per-share (EPS) profit of $4.21 excluding non-recurring items versus consensus analyst estimates for a profit of $3.71, a $0.50 beat. Revenues grew 2.7% year-over-year (YoY) to $14.82 billion beating analyst estimates for $14.73 billion. Adjusted EBITDA totaled $3.042 billion in Q2 2022, falling from 2021 adjusted EBITDA of $3.219 billion. Net income fell to $1.155 billion or $3.90 per diluted share from $1.450 billion or $4.36 per diluted shares in the year ago quarter. Same facility admissions fell (-1.2%) in the quarter, but same facility emergency room visits rose 7.3% YoY. Same facility inpatient surgeries fell (2.3%) and outpatient surgeries fell (-1.4) YoY. HCA Healthcare CEO Sam Hazen commented, “Many aspects of our business were positive considering the challenges we faced with the labor market and other inflationary pressures on costs.” The Inflation Reduction Act benefits hospitals as more patients continue to keep their Affordable Care Act (ACA) coverage plans. HCA has also managed to sequentially lower its contract labor costs. It expects volumes to return to pre-pandemic seasonal trends with a more modest growth in inpatient admissions.

 

Can HCA Healthcare Weather the Normalization?

Here’s What the Charts Say

Using the rifle charts on the weekly and daily time frames enables a precision view of the price playing field for HCA. The weekly rifle chart bottomed under the $165.73 Fibonacci (fib) level. The weekly rifle chart coiled from the lows to breakout and peak at $222.41 before the buying momentum slowed down. The weekly 5-period moving average (MA) is sloping down at $205.18 with a flat 15-period MA at $197.45. The weekly stochastic rejected at the 80-band and reversed back down. The weekly market structure low (MSL) triggers on the breakout through $211.99. The daily rifle chart has been downtrending with a falling 5-period MA resistance at $198.91 followed by the 15-period MA falling at $207.01. The daily 50-period MA resistance stands at $205.59 in between. The daily stochastic is still in an oscillation down nearing the 20-band. The daily lower Bollinger Bands (BBs) sit near the $184.68 fib level. Attractive pullback levels sit at the $188.33 fib, $184.33 fib, $177.16 fib, $173.72, $170.46 fib, $167.51 fib, and $160.23 fib.    

Should you invest $1,000 in HCA Healthcare right now?

Before you consider HCA Healthcare, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and HCA Healthcare wasn't on the list.

While HCA Healthcare currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
HCA Healthcare (HCA)
2.5462 of 5 stars
$239.37+0.9%0.94%13.52Moderate Buy$235.10
Humana (HUM)
2.7042 of 5 stars
$540.95+0.5%0.58%24.53Moderate Buy$579.00
CVS Health (CVS)
2.4154 of 5 stars
$101.26+1.2%2.17%43.09Moderate Buy$118.84
UnitedHealth Group (UNH)
3.037 of 5 stars
$537.62+1.5%1.23%26.33Moderate Buy$595.11
Cigna (CI)
2.845 of 5 stars
$323.90+1.3%1.38%15.47Moderate Buy$329.32
Compare These Stocks  Add These Stocks to My Watchlist 

Jea Yu

About Jea Yu

Contributing Author: Trading Strategies

With over 20 years of active participation and analysis of the US equities, options and futures markets, Mr. Yu brings fresh insights into the workings of the financial markets. He has published four books by esteemed publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. His brainchild, the Underground Trader, was voted Forbes Best of the Web for four consecutive years under the active trader category. He has been a featured speaker all over the country at various expos and seminars who enjoys a standing-room-only reception in the largest convention halls from New York to Las Vegas. He has been quoted and featured in USA Today, Wall Street Journal, Traders Magazine and the Financial Times and various trade publications like Stocks & Commodities, Active Trader and Online Investor. Mr. Yu has a B.A. in Liberal Arts and minor in Business Administration from the University of Maryland.
Contact Jea Yu via email at JeaYu21@gmail.com.