Company Reports

Narrow-moat HCA Healthcare turned in better-than-anticipated first-quarter results that benefited from improving medical utilization trends. However, the company merely maintained its guidance for the full year, which appears to have disappointed the market. Considering that our expectations remain within current guidance ranges, we are not changing our $285 fair value estimate, and we continue to view HCA shares as about fairly valued.

Narrow-moat HCA Healthcare turned in better-than-anticipated fourth-quarter results that benefited from improving medical utilization trends and easing labor pressures. Considering these strong trends and cash flows generated since our last valuation update in early 2023, we are moderately increasing our fair value estimate on HCA to $285 per share from $260. While providers like HCA may continue to benefit from the increasing medical utilization trends that are constraining health insurer results in 2024, we view HCA shares as about fairly valued.

HCA Healthcare operates the largest network of hospitals in the United States, focusing on attractive geographic locations where it has the potential for leading and increasing market share. With headquarters in Nashville and locations in 20 states and England, its facilities are particularly concentrated in Texas and Florida, which represent over half of its bed count. In those states, urban areas of focus include Dallas, Austin, Tampa, and Miami; those geographic areas provide a good sense of the positive demographic factors that the firm aims to benefit from across the country.

HCA Healthcare operates the largest network of hospitals in the United States, focusing on attractive geographic locations where it has the potential for leading and increasing market share. With headquarters in Nashville and locations in 20 states and England, its facilities are particularly concentrated in Texas and Florida, which represent over half of its bed count. In those states, urban areas of focus include Dallas, Austin, Tampa, and Miami; those geographic areas provide a good sense of the positive demographic factors that the firm aims to benefit from across the country.

Narrow-moat HCA turned in a weaker-than-anticipated third quarter, which was constrained by underperformance at Velasco, its hospital-based physician venture that may create a moderate profit headwind, going forward. However, underlying trends in its provider services were strong, and our 2023 expectations remain within management's updated outlook. At first glance, we do not see a reason to materially change our $260 fair value estimate, which appears mildly above where shares recently traded.

Narrow-moat HCA Healthcare turned in better-than-anticipated second-quarter results that benefited from improving medical utilization trends and easing labor cost pressures. These factors contributed to a moderate increase in management's 2023 outlook. However, our expectations remain roughly in line with that outlook, and our $260 fair value estimate is unchanged. The shares traded down toward our fair value estimate after the release, as investors may have been hoping for even better results after recent insurer comments about increasing medical utilization.

Narrow-moat HCA Healthcare's better-than-anticipated first-quarter results benefited from improving medical utilization trends and easing labor cost pressures. These factors contributed to a meaningful increase in management's 2023 outlook. Considering these trends and cash flows generated since our last valuation change, we are increasing our fair value estimate by 9% to $260 per share.

HCA Healthcare operates the largest network of hospitals in the United States, focusing on attractive geographic locations where it has the potential for leading and increasing market share. With headquarters in Nashville and locations in 20 states and England, its facilities are particularly concentrated in Texas and Florida, which represent over half of its bed count. In those states, urban areas of focus include Dallas, Austin, Tampa, and Miami; those geographic areas provide a good sense of the positive demographic factors that the firm aims to benefit from across the country.

Narrow-moat HCA turned in weak fourth-quarter results that included ongoing labor challenges and pressures from Hurricane Ian in its Florida stronghold. Also, the company gave slightly lower guidance for 2023 than we had been expecting, even when including a new share repurchase program. However, when also considering recently generated cash flows and our largely unchanged longer-term assumptions that are the key drivers of HCA's value, we do not anticipate adjusting our $239 fair value estimate even after making mild changes to our near-term estimates. HCA also noted some positive underlying trends that appear to have buoyed shares despite those weak headlines. Shares appear fairly valued to us.

Narrow-moat HCA Healthcare turned in solid third-quarter results even as macroeconomic challenges and Hurricane Ian pressured the firm. Considering the mounting uncertainty surrounding hospitals prior to a potential economic downturn, we have trimmed our near-term expectations through 2023. However, when also considering recently generated cash flows and that our longer-term assumptions are the key driver of value, we do not anticipate adjusting our $239 fair value estimate. HCA shares appear moderately undervalued to us.

Narrow-moat HCA Healthcare turned in solid second-quarter results even as labor cost inflation pressured its bottom line. With results roughly tracking toward our expectations for the full year, we do not anticipate changing our $239 fair value estimate. The shares still trade at a moderate discount to our valuation even after rising substantially in early trading after this quarter's announcement.

HCA operates the largest network of hospitals in the United States, focusing on attractive geographic locations where it has the potential for leading and increasing market share. While it has locations in nearly 20 states and headquarters in Nashville, its facilities are particularly concentrated in Texas and Florida, which represent over half of its bed count. In those states, urban areas of focus include Dallas, Austin, Tampa, and Miami, and those geographic areas provide a good sense of the positive demographic factors that the firm aims to benefit from across the country.

Narrow-moat HCA Healthcare turned in weaker-than-expected first-quarter results as labor cost inflation put pressure on the bottom line, and management has lowered its guidance for 2022 after only one quarter. However, considering cash flows generated since our last valuation update, we are not changing our $239 fair value estimate. Even with a midteens percentage drop after today's announcement, the shares still look about fairly valued.

Narrow-moat HCA turned in fourth-quarter results that were a little weaker than we had expected, as the omicron variant surge appeared to put pressure on the firm's top and bottom lines. However, after incorporating a lower U.S. corporate tax rate assumption than we previously expected, we are maintaining our $239 fair value estimate. HCA shares look about fairly valued, despite the mid-single-digit decline after the earnings report Jan. 27.

After Sen. Joe Manchin (D-VA) announced opposition to the Build Back Better bill, we do not expect Congress to enact policies that will significantly increase the insured rate in the U.S. beyond recent measures. While we view this development as mildly negative operationally for medical services firms, positively, those concerns appear likely to be at least offset in our fair value estimates by a reversal of our assumption that the U.S. corporate tax rate would rise and recent cash flows. However, maintaining the status quo in the U.S. healthcare system could keep ESG risks alive for medical service firms in the long run.

HCA turned in strong third-quarter results that put it on target to beat our previous expectations for 2021. We have raised our near-term expectations moderately, resulting in a 6% increase in our fair value estimate to $239 per share. We were surprised by the negative market reaction (down in the midsingle digits) to these results, as investors focused on management's projection of a potential sequential decline in EBITDA in the fourth quarter on the low end of its 2021 target range. After such a phenomenal third quarter and rest of 2021, we think that projection may simply reflect conservatism, and overall, HCA's recent results have shown us its resilience even in challenging conditions, which reinforces our narrow economic moat rating.

HCA operates the largest network of hospitals in the United States, focusing on attractive geographic locations where it has the potential for leading and increasing market share. While it has locations in nearly 20 states and headquarters in Nashville, its facilities are particularly concentrated in Texas and Florida, which represent over half of its bed count. In those states, urban areas of focus include Dallas, Austin, Tampa, and Miami, and those geographic areas provide a good sense of the positive demographic factors that HCA aims to benefit from across the country.

Potential healthcare policy changes look set to expand U.S. insurance rolls through existing programs like the individual exchanges and Medicaid. That expansion provides opportunities for managed-care organizations and caregivers, which should largely offset (even override, in some cases) the potential U.S. corporate tax rate increase needed to pay for various U.S. government initiatives. We have confirmed our moat ratings and adjusted our fair value estimates for these effects, with relatively mild changes for the MCOs and much larger increases for some caregivers related to the latter's more significant margin expansion prospects and leverage that magnified that effect on residual equity values. This view follows our previous research on potential policy changes that highlighted the public option as the key downside risk for these sectors. With the public option not being considered in potential policy changes, we think the policy landscape is rife with opportunity rather than risk for MCOs and caregivers.

HCA operates the largest network of hospitals in the United States, focusing on attractive geographic locations where it has the potential for leading and increasing market share. While it has locations in nearly 20 states and headquarters in Nashville, its facilities are particularly concentrated in Texas and Florida, which represent over half of its bed count. In those states, urban areas of focus include Dallas, Austin, Tampa, and Miami, and those geographic areas provide a good sense of the positive demographic factors that HCA aims to benefit from across the country.

Narrow-moat HCA Healthcare significantly beat consensus expectations in the second quarter and raised its guidance for the second time in 2021. At first glance, we plan to raise our fair value estimate about 40%, driven roughly equally by these strong trends and potential U.S. healthcare policy changes. Shares will look close to fairly valued after this expected increase.