Zacks Industry Outlook Highlights: Tenet Healthcare, Universal Health Services, Acadia Healthcare and Community Health Systems
For Immediate Release
Chicago, IL – June 11, 2021 – Today, Zacks Equity Research discusses Hospitals, includingTenet Healthcare Corp. THC, Universal Health Services, Inc. UHS, Acadia Healthcare Company, Inc. ACHC and Community Health Systems, Inc. CYH.
The hospital companies suffered a major setback last year as they had to delay non-emergency medical procedures to accommodate the COVID-infected patients. Hospitals also had to incur elevated expenses to keep the healthcare workers safe as well as treat a huge number of coronavirus patients.
High demand for medical equipment induced a surge in prices, which drained the margins of these companies. In order to curb costs, companies took several initiatives, such as temporary salary reductions, furloughing employees, etc.
However, this bleak financial situation, mainly caused by lower admissions and halted medical procedures, is now recovering. Year to date, the Zacks – Hospital industry has gained 26%, outperforming the broader market. The Zacks S&P 500 composite has rallied 13.1% in the same time frame while the Zacks Medical sector has gained 0.3%. Notably, the industry’s earnings estimate for the current year has been revised 34.8% upward in the past year.
Companies in the industry are well-poised for growth on the back of strategic acquisitions and divestitures, cost-curbing initiatives, digital expansion, strong capital deployment, penetration into new geography, telehealth services and a rebound in patient volumes. Diversification of business and addition of capabilities alongside growth in niches should add to this overall upside. With the major population being fully vaccinated against COVID-19, hospitals are taking up elective procedures after a long gap.
Some of the leading hospitals, such as Tenet Healthcare is undertaking strategic divestitures at a steady pace to eliminate its non-core and unprofitable business units to streamline operations and repay debt. The leading players are also likely to gain from government business, which consists of Medicaid and Medicare Advantage.
Hospitals with behavioral platforms are likely to benefit as the pandemic significantly spiked the drug abuse syndrome and mental health issues. For instance, Universal Health Services zeroes in on behavioral indications like eating disorders, sexual trauma, autism as well as disorderliness in the military through its patriot support program.
The company tried every trick in the book to boost its behavioral health portfolio through joint ventures. This segment holds immense scope for growth in the days ahead, considering the dire need of addressing behavioral health issues triggered by the pandemic.
The Zacks Hospital industry is currently undervalued compared with the Zacks S&P 500 composite as well as the Zacks Medical sector. The price-to-earnings (P/E) trailing 12-month ratio, the best multiple for valuing hospital companies, is 16.49X, lower than the Zacks S&P 500 composite’s average of 27.86X and the sector’s P/E of 25.94X. Such below-market positioning hints at more room to run in the coming quarters.
Stocks in Focus
With the help of the Zacks Stock Screener, we selected four hospital stocks that are well poised for growth, riding on operational strength. These stocks have outperformed the industry year to date and also witnessed upward estimate revisions in the past 60 days.
That all the companies have growth potential is evident from their favorable VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Acadia Healthcare Company provides behavioral health care services in the United States and the United Kingdom. It currently has a Zacks Rank #3 (Hold). Accretive acquisitions, strong top and bottom-line growth and a solid balance sheet should drive long-term growth. The company has witnessed its 2021 earnings estimate move 4.7% north over the past 60 days. The stock has gained 31.6% year to date.
Community Health Systems is one of the largest publicly-traded hospital companies in the United States, and a leading operator of general acute care hospitals and outpatient facilities. It carries a Zacks Rank of 3, presently. An aging population, growing demand for healthcare services, declining expenses and accretive acquisitions are its key positives.
The stock has witnessed its current-year earnings estimate move 257.9% up over the past 60 days. The expected long-term earnings growth rate is pegged at 9.6%. The stock has risen 106.2% in the year-to-date period.
Headquartered in Dallas, TX, Tenet Healthcare is an investor-owned health care services company, which owns and operates general hospitals and related health care facilities. The company holds a Zacks Rank #2 (Buy), currently. Divestitures, acquisitions and growth in the outpatient business along with lower expenses are its tailwinds.
The stock has witnessed its current-year earnings estimate move 17.4% up over the past 60 days. The company’s shares have gained 69.5% in the year-to-date time frame.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>
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.
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.
Click to get this free report
Universal Health Services, Inc. (UHS): Free Stock Analysis Report
Tenet Healthcare Corporation (THC): Free Stock Analysis Report
Community Health Systems, Inc. (CYH): Free Stock Analysis Report
Acadia Healthcare Company, Inc. (ACHC): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.