HCA Healthcare, Inc. has been favored by investors on the back of its growth initiatives and cost-cutting measures.

Over the past 30 days, the company has witnessed its 2021 and 2022 earnings estimates move north, respectively. This upside instills investor’s confidence in the stock.

The company is well-poised for progress, evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

Its long-term growth rate stands at 11.7%, above the industry’s average of 10.3%.

HCA Healthcare came up with an earnings surprise of 58.5%, on average, beating on the bottom line in two of the trailing four quarters while missing on the same in the remaining two.

Further, the company’s trailing 12-month return on equity (ROE) of 335.2% reflects its growth potential. It compares favorably with the industry average of 134.7%. Its ROE mirrors its efficiency in using its shareholders’ funds.
Now let’s see how this company is an investor favorite.

HCA Healthcare’s fourth-quarter 2020 adjusted earnings of $4.13 per share beat the Zacks Consensus Estimate by 13.8%. Further, the bottom line improved 33.7% year over year on the back of higher revenues.The company witnessed solid inpatient volumes in the quarter.

It is constantly strategizing and capitalizing on telehealth medicine amid the COVID-19 scenario. With government rules in place, more and more people availed of telehealth care to contain the spread of the coronavirus. To expand its presence, the company also acquired a 40% interest in a telemedicine company.

Acquisitions have always been its major growth trajectory. Its inorganic growth policies led to an increase in patient volumes-enabled network expansion across several markets and added hospitals to its portfolio. In 2020, it spent $568 million on acquiring hospitals and health care entities. It recently bought a 40% stake in a telemedicine company as well. The company has projects worth $3.3 billion in its pipeline that it expects to be operational this year or in 2022. All these initiatives bode well for the company in the long haul.

To reduce expenses, the company undertook a series of cost-management strategies, such as travel freezes, regulation of variable cost structure, reduction in discretionary spending, etc.

The company devised a three-stage cost-reduction plan, and implemented the first-stage items along with a few second-stage ones in the second quarter. We expect these measures to help reduce expenses going forward.

Following fourth-quarter results, the company issued 2021 outlook. Management expects revenues for the current year in the band of $53.5-$55.5 billion, the midpoint indicating an upside of 5.8% from the 2020 reported figure.

Adjusted EBITDA is estimated to be $10.3-$10.9 billion, implying growth from the 2020 reported figure of $10 billion.

EPS for the company is projected at $12.10-$13.10 per share, the midpoint suggesting an upside of 15.3%.

Zacks Rank and Price Performance

Shares of this presently Zacks Rank #3 (Hold) company have gained 82.6% in the past year, outperforming its industry’s growth of 82.3%.

Other companies in the same space, such as Tenet Healthcare Corporation, Community Health Systems Inc. and Select Medical Holdings Corporation have also soared 217.2%, 225.3% and 100.5% each in the same time frame. All these companies presently carry a Zacks Rank #2 (Buy).

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