HCA's Surprising Surge Thanks to Obamacare

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HCA (NYSE: HCA) gave hospital investors a bit of a surprise today by pre-releasing second quarter results. Those results impressed investors, sending shares skyrocketing by nearly 10%, but it wasn't just HCA that headed higher. Competitors including Tenet Healthcare jumped too. In the following slideshow you'll learn what was behind HCA's shocking quarter and what you might expect from here.

Transcript of HCA's Surprising Surge Thanks to Obamacare

  • HCA Surges Thanks to Obamacare
  • HCA Holdings Inc. "Results for the second quarter of 2014 exceeded our internal expectations, both in terms of core operations and healthcare reform," said CEO R. Milton Johnson.
  • Driving HCAs surprising surge Second quarter sales will total $9.23 billion. Up from $8.45 billion last year. Admissions at facilities open at least a year grew by 1.2%. Higher admissions tied to reform driven enrollment expansion and an improving economy. Revenue per equivalent admission grew 5.4%.
  • Driving HCAs surprising surge Second quarter net income will total $904 million. Up from $806 million last year. EPS will be $1.07. Up from $0.91 last year and ahead of $0.92 analyst estimates. Positively impacted by falling unreimbursed care thanks to Medicaid and exchange insurance enrollment.
  • Driving HCAs surprising surge Reform will boost adjusted EBITDA by between 2% and 3% this year. Above its prior outlook for a 1% to 2% benefit.
  • Driving HCAs surprising surge Better than expected results prompt management to bump up full year guidance. Revenue is expected to total $36 billion to $36.5 billion. EPS is expected to be between $4 and $4.25. Significant increase from prior $3.45 to $3.75 guidance.
  • Driving HCAs surprising surge Guidance improves valuation. Pre guidance P/E of between 15.12 and 16 (not including todays move). Post guidance P/E of between 13.8 and 12.99 (not including todays move). Suggests upside from current 2017 EPS estimates for $4.96.
  • Fool-worthy thoughts Full results will be reported on July 29th. Admission and pricing supports results for Tenet Healthcare. Reform enrollment likely reduced bad debt expense. 8 million public exchange enrollees and 6 million new Medicaid enrollees boost care demand. Supports investment in outpatient facilities. Urgent care and stand-alone ERs. Capital expenditure forecast is unchanged at $2.2 billion. Analyst upward revisions likely.
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