On Dec 22, 2014, shares of HCA Holdings, Inc. (HCA) scaled a 52-week high of $74.98 on the back of compelling inorganic growth, rating upgradation by Moody’s as well as a solid third quarter performance. With about 0.1 million shares exchanging hands in the last trading session, the scrip closed at $74.96 per share, gaining 0.7% for the day.
The year-to-date return from the stock is at 57.1%, — significantly ahead of the S&P return of 12.4%.
HCA Holdings has been consistently enhancing its inorganic growth along with its global expansion. It recently acquired Dallas-based CareNow which has 24 urgent care centers in the Dallas-Fort Worth area. Another acquisition, PatientKeeper®, is a Massachusetts-based leading software and mobile applications provider facilitating the doctors in relating to patients’ electronic health records and document care.
Rating affirmations from credit rating agencies are essential in retaining investor confidence in the stock and maintaining its creditworthiness in the market. HCA Holdings scores strongly with the rating agencies. In Oct 2014, the Corporate Family Rating of medical hospitals stock was upgraded to Ba3 from B1 by Moody's Investors Service with a stable outlook.
The rating reflects the company’s efforts to employ financial policies which ensure returns to shareholders but simultaneously limit the rise in leverage. It also depicts Moody’s expectation that the company will improve its profit margins and cash flow in the upcoming period as benefits from the Affordable Care Act will result in lower bad debt expense and improved cash collection
With respect to earnings performance, HCA Holdings delivered positive earnings surprises in two out of the last four quarters with an average beat of 1.7%. In the last reported quarter, the medical hospital stock delivered net earnings of $1.18 per share, outperforming the Zacks Consensus Estimate by 0.85% and also improving year over year by 49%. This improvement was the result of top-line improvement which also surpassed the Zacks Consensus Estimate by 0.47%.
This Zacks Rank #2 (Buy) stock has been witnessing upward estimate revisions in the Zacks Consensus Estimate over the last 30 days. For 2014, the Zacks Consensus Estimate moved north by 0.4% to $4.56 per share and for 2015 it rose by 0.4% to $5.06 per share. The long-term growth of HCA Holdings is targeted at 11%.
Other Stocks to Consider
Other stocks holding the same Zacks Rank as HCA Holdings include Acadia Healthcare Company, Inc. (ACHC), Adeptus Health Inc. (ADPT) and Community Health Systems, Inc. (CYH).
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