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Why HCA Healthcare, Inc. Stock Jumped Today

Medical professionals looking at tablet in a building corridor.

What happened

Shares of HCA Healthcare, Inc. (NYSE: HCA) jumped 9.3% as of 3:48 p.m. EDT on Wednesday. The nice gain followed the hospital operator's announcement of its second-quarter financial results before the market opened.

HCA's Q2 revenue of $11.5 billion easily beat the consensus Wall Street estimate of $11.3 billion. The company topped the Street's expectations on the bottom line, as well, with earnings per share (EPS) of $2.31 compared to the average analyst estimate of $2.16.

Thanks to its solid performance, HCA also upped its full-year 2018 guidance. The company now expects full-year revenue of $45.5 billion to $46.5 billion compared to its previous outlook of revenue between $45 billion and $46 billion. Earnings per share for 2018 are projected to be between $9 and $9.40, up from HCA's earlier EPS guidance of $8.50 to $9.

Medical professionals looking at tablet in a building corridor.

Image source: Getty Images.

So what

The year is definitely going in HCA Healthcare's favor so far. Its stock price is up around 34% year to date. HCA's Q2 results followed a solid first-quarter update in May.

Looking at the second-quarter details shows that HCA received a $9 million boost from sales of some facilities. However, that amounted to a positive impact of only $0.02 per share. A bigger factor for the company was its lower effective tax rate that resulted from U.S. corporate tax reform. HCA reported that this tax benefit increased its earnings by $0.34 per share.

Still, HCA's operational performance in the second quarter was solid. Admissions were up year over year, as were both inpatient and outpatient surgeries. Even better, same-facility revenue per admission increased by 3.6% from the second quarter of 2017. The only decline came in same-facility emergency room visits, which fell 0.8% from the prior-year period.

The most important news for investors from HCA's Q2 update was the improved full-year 2018 guidance. This optimistic revision bodes well for the hospital chain's prospects in the second half of the year.

Now what

What's next for HCA Healthcare? The company needs to keep doing what it's been doing. HCA already ranks either No. 1 or No. 2 in market share in 28 of 38 major markets. It has significant operations in 16 of the top 25 metropolitan areas in the U.S.

While some hospital operators have struggled with too much debt, HCA appears to be managing its debt of $33.3 billion relatively well. The company even lowered its leverage ratio from 4.02 at the end of 2017 to 3.99 at the end of the second quarter.

Investors should look forward to seeing how HCA executes on using its scale as the nation's largest for-profit hospital chain to improve its competitive position. They also can look forward to more dividends after HCA initiated its dividend program earlier this year.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends HCA Healthcare. The Motley Fool has a disclosure policy .

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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