On Monday, KeyBanc Capital Markets adjusted its outlook on HCA Healthcare Inc (NYSE:HCA), reducing the price target to $420 from the previous $475 while maintaining an Overweight rating on the stock. The revision follows the company's third-quarter results, which aligned closely with Wall Street expectations.
The performance was buoyed by solid same-store volumes and higher Medicaid disproportionate share hospital payments (DPPs), which helped to mitigate the impact of disruptions caused by hurricanes.
The healthcare provider's shares fell by 8.9% on Friday, a sharper decline than the broader market, with the S&P 500 slipping by a mere 0.03%. The drop in HCA's stock price is attributed to several factors, including projections for 2025 EBITDA (earnings before interest, taxes, depreciation, and amortization) being slightly below Street estimates.
This forecast is influenced by a reduced 2024 baseline due to hurricane effects, and the management's lack of confirmation on potential positive drivers for 2025 EBITDA, such as insurance recoveries or Medicaid DPPs.
Additionally, market dynamics ahead of the upcoming election have also played a role, with concerns that a victory for Trump could negatively impact hospital stocks. Furthermore, HCA's valuation was deemed elevated, contributing to the bearish sentiment.
Despite these concerns, KeyBanc remains positive on HCA Healthcare's outlook and suggests that investors could consider increasing their positions in the company's stock following the election results. The Overweight rating indicates the firm's belief in the stock's potential to outperform the average total return of the stocks covered in the sector over the next 6 to 12 months.
In other recent news, HCA Healthcare reported a 25% increase in adjusted diluted earnings per share to $4.90 and a 7.1% revenue growth from the same facilities, despite the challenges posed by Hurricanes Helene and Milton.
These natural disasters led to an estimated revenue loss of $50 million for Q3, with an additional projected loss of $200-$300 million for Q4. TD Cowen has adjusted its price target for HCA Healthcare to $440, while maintaining a buy recommendation. Simultaneously, Mizuho maintained its price target of $425, and Cantor Fitzgerald raised its target to $405.
The company has also revealed expansion plans, aiming to add 600 inpatient beds and 100 outpatient facilities by the end of 2024. For 2025, HCA Healthcare anticipates volume growth between 3% to 4%, with formal guidance to be provided in January.
These recent developments highlight HCA Healthcare's strategic approach to navigate through natural disasters while maintaining a robust financial position. The company's management and analysts from TD Cowen, Mizuho, and Cantor Fitzgerald have expressed confidence in its continued growth trajectory.
InvestingPro Insights
Despite the recent stock price drop, HCA Healthcare's financial metrics and market position remain strong. According to InvestingPro data, HCA boasts a market capitalization of $93.82 billion and a P/E ratio of 16.3, suggesting a reasonable valuation relative to earnings. The company's revenue for the last twelve months stands at an impressive $69.62 billion, with a robust revenue growth of 10.23% over the same period.
InvestingPro Tips highlight HCA's financial strength and shareholder-friendly policies. The company has been aggressively buying back shares, which can potentially increase shareholder value. Additionally, HCA has raised its dividend for four consecutive years, demonstrating a commitment to returning value to shareholders. This is further supported by a dividend yield of 0.73% and a dividend growth rate of 10% over the last twelve months.
While KeyBanc has adjusted its price target, it's worth noting that InvestingPro's fair value estimate for HCA stands at $372.22, suggesting potential upside from the current price. Investors interested in a deeper analysis can access 11 additional InvestingPro Tips for HCA Healthcare, providing a more comprehensive view of the company's prospects and potential risks.
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