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HCA Holdings' Preliminary Results Point to Below Par Q3

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HCA Holdings, Inc . HCA gave a sneak peek into its third-quarter results. The company expects to deliver earnings of $1.17 per share on revenues of $9.86 billion. However, the expected numbers are shy of the Zacks Consensus Estimate of $1.24 for earnings and $9.87 billion for revenues. Nonetheless, these translate into a year-over-year improvement of 0.9% for the bottom line and 6.9% for the top line.

Adjusted EBITDA is projected at about $1.815 billion, which is down 0.7% year over year. Pretax income is estimated to decline 0.9% year over year to $921 million in the third quarter.

Looking deeper, a less favorable payer mix and higher labor costs induced operating margin contraction for the third quarter. Lower productivity and an increase in contract labor increased labor costs which is likely to affect revenues by 46.9%, higher than year-ago figure of 45.7%.

Nonetheless, HCA Holdings noted solid volumes for the third quarter with same facility admissions increasing 2.9% and same facility equivalent admissions increasing 3.6%. Same facility emergency room visits in the to-be reported quarter is likely to have increased 5.8% year over year. While same facility uninsured admissions is expected to have accounted for 8% of total admissions, same facility managed care/other admissions accounted for 28.5% of admissions. HCA Holdings estimates same facility revenue per equivalent admission to move up 1.9% year over year. However, the company had to possibly digest $2 million losses on sales of facilities in the third quarter, though this compares favorably with $120 million losses incurred in the year-ago quarter.

HCA Holdings is scheduled to announce third-quarter earnings on Oct 27. With respect to its earnings trend, the company delivered positive surprises in the last four quarters, with an average beat of 2.37. However, our proven model does not conclusively show that HCA Holdings will beat earnings this quarter. This is because though the Zacks Rank #3 (Hold) increases the predictive power of an earnings beat, Earnings ESP of -1.61% makes prediction difficult. Earnings ESP represents the difference between the Most Accurate estimate of $1.22 and the Zacks Consensus Estimate of $1.24.

The Zacks Consensus Estimate for the third quarter translates into a year-over-year increase of 4.9%.

2015 Projection

Adjusted EBITDA for 2015 is expected at about $7.8 billion. The company also estimates adjusted earnings between $5.20 and $5.25 per share, tightened from the earlier guided range of $4.90-$5.30 per share. The Zacks Consensus Estimate for the same is currently pegged at $5.30, which is above the company's guided range. We expect the same to move down as analysts tweak their estimates to incorporate the guidance into their numbers.

Stocks to Consider

Some better-ranked stocks in the hospital industry are Adeptus Health Inc. ADPT , Acadia Healthcare Company, Inc. ACHC and MEDNAX, Inc. MD . While Adeptus Health sports a Zacks Rank #1 (Strong Buy), Acadia Healthcare and MEDNAX carry a Zacks Rank #2 (Buy).

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MEDNAX INC (MD): Free Stock Analysis Report

ACADIA HEALTHCR (ACHC): Free Stock Analysis Report

HCA HOLDINGS (HCA): Free Stock Analysis Report

ADEPTUS HEALTH (ADPT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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