Why Is HCA Holdings (HCA) Up 7.4% Since The Last Earnings Report?

It has been about a month since the last earnings report for HCA Holdings, Inc. (NYSE:HCA) . Shares have added about 7.4% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

HCA Holdings Q4 Earnings Beat, Revenues Miss

HCA Holdings reported fourth-quarter 2016 adjusted earnings of $1.89 per share, which beat the Zacks Consensus Estimate of $1.78 by 6.2%. Earnings also grew 11.8% year over year on higher revenues.

For full-year 2016, adjusted earnings per share came in at $6.87, up 23.6% year over year.

Revenues increased 3.8% year-over-year to $10.64 billion. However, the top line missed the Zacks Consensus Estimate of $10.69 billion.

Revenues for the year ended Dec 31, 2016 totaled $41.49 billion, up 4.6% year over year from $39.68 billion in 2015.

For the quarter ended Dec 31, 2016, the provision for doubtful accounts declined 19.4% year over year to $865 million.

Quarter Details

During the fourth quarter, salaries and benefits, supplies and other operating expenses increased 4% year over year to $8.45 billion.

Same facility equivalent admissions inched up 1.5%, while same facility admissions increased 1.6%. Same facility emergency room (ER) visits rose 1.6% year over year.

In-patient surgeries were up 1.4%, while outpatient surgeries were down 0.6% in the fourth quarter, on a same facility basis.

Same facility revenue per equivalent admission grew 1.9%.

Same facility operating expense per equivalent admission increased 2.8% from the prior-year quarter.

As of Dec 31, 2016, HCA Holdings operated 170 hospitals and 118 freestanding surgery centers.

Financial update

HCA Holdings exited 2016 with cash and cash equivalents of $646 million, total debt of $31.376 billion, and total assets of $33.758 billion.

During the fourth quarter, capital expenditures – excluding acquisitions – totaled $876 million.

Cash flows from operating activities totaled $1.699 billion compared with $1.558 billion in the year-ago quarter.

Share Repurchase and Dividend Update

During the fourth quarter, HCA Holdings repurchased 7.261 million shares of its common stock for $538 million.

The company had 370.536 million shares outstanding as of Dec 31, 2016 compared with 398.739 million shares outstanding as of Dec 31, 2015.
Guidance for 2017

For 2017, revenues are expected in the range of $43 billion to $44 billion, while adjusted EBITDA per share is forecast in the range of $8.40 to $8.70.

Adjusted earnings per diluted share are projected in the range of $7.20–$7.60 per share.

Capital expenditure is projected to be approximately $2.9 billion.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been three downward revisions for the current quarter

HCA Holdings, Inc. Price and Consensus

HCA Holdings, Inc. Price and Consensus | HCA Holdings, Inc. Quote

VGM Scores

At this time, HCA Holdings' stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the stock is suitable for value and growth investors.

Outlook

Estimates have been trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestinegly, the stock has Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.