Will HCA Holdings (HCA) Q1 Earnings Pull Off A Surprise?

HCA Holdings, Inc. (NYSE:HCA) is scheduled to report first-quarter 2017 results on May 2, before the market opens.

Last quarter, this hospital company surpassed the Zacks Consensus Estimate by 6.2%. Let’s see how things are shaping up for this announcement.

Q1 Flash back

The company has reported same facility admission and adjusted admissions growth for nine consecutive years, Emergency Room visit growth for 10 consecutive years and surgical growth for three consecutive years. The trend is expected to continue in the quarter to be reported.

The company consistently makes capital expenditure for the expansion of services and capacity in its large fast growing urban markets. In 2016, it incurred $2.76 billion in this regard and expects to invest $2.9 billion in 2017. We believe these investments will generate top-line growth by increasing business volumes.

Share bought back by the company during the to-be reported will cushion the bottom line. The company has not paid regular dividend since its IPO in 2011. It prefers share buyback over dividend payment for allocating capital and will maintain its current policy on dividend payouts.

Last month, the company announced preliminary financial and operating results for the to-be reported quarter. It anticipates revenues to approximate $10.623 billion, up 3.5% year over year, net income to approximate $659 million, or $1.74 per diluted share, down 5% on consolidated basis but up 3% on a per share basis, and adjusted EBITDA to approximate $2.005 billion, up 0.1% year over year.

Same facility admissions in the first quarter of 2017 increased 1.2%, while same facility equivalent admissions increased 1.6% from the first quarter of 2016. Same facility emergency room visits for the first quarter of 2017 increased 1.1% year over year.

Results for the first quarter of 2017 were affected by changes in payer mix and the loss of one day when compared with the first quarter of 2016.

Earnings Whispers

Our proven model does not conclusively show that HCA Holdings is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: HCA Holdings has an Earning ESP of 0.00%. This is because the Most Accurate estimate stands at $1.74 per share, in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: HCA Holdings carries a Zacks Rank #3, which increases the predictive power of ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Prudential Financial Inc. (NYSE:PRU) will report first-quarter 2017 earnings results on May 3. The company has an Earnings ESP of +0.38% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Priceline Group Inc. (NASDAQ:PCLN) has an Earnings ESP of +2.05% and a Zacks Rank #3. The company is expected to report first-quarter earnings results on May 9.

Moody’s Corporation (NYSE:MCO) has an Earnings ESP of +7.38% and a Zacks Rank #2. The company is expected to report first-quarter earnings results on May 5.

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