HCA Healthcare, Inc. HCA is scheduled to release second-quarter 2018 results on Jul 25. Last reported quarter, the company delivered a positive earnings surprise of nearly 11.2%.

The company has likely witnessed an increase in revenues in the second quarter, continuing with the trend over the past few quarters. It is expected to have been driven by higher facility admissions and equivalent admissions, surgical growth and same facility emergency room growth. The Zacks Consensus Estimate for the company’s second-quarter top line is pegged at $11.3 billion, up 5.4% from the year-ago quarter.

However, the company’s results in the to-be-reported quarter might have suffered an industry-wide softness in volumes, driven by several factors such as payor initiatives and rising costs plus prevalence of high deductible health plans, which can lower admissions in hospital. Its bottom-line is also likely to have been weighed on by escalating costs for workforce development and other investments.

Nonetheless, lower tax rates owing to the Tax Cuts and Jobs Act are likely to have reduced the company’s tax burden, boosting its bottom line in turn.

The company has been quite active when it comes to expanding its footprint via strategic acquisitions. Its inorganic growth profile has helped it enhance the portfolio with Highlands Regional Medical Center in Sebring, FL and Weatherford Regional Medical Center outside Fort Worth, TX from subsidiaries of Community Health Systems, Inc in July 2017. The Zacks Consensus Estimate for total number of hospitals is pegged at 179, up from 172 in the year-ago quarter. This, in turn, is anticipated to drive admission volume as well. Per the consensus estimate, total admissions should be up 4.8% year over year.

In order to add shareholder value, the company has been effectively deploying capital over the past few quarters. The momentum has likely continued in the second quarter, which should favor the bottom line by limiting the share count.

What the Quantitative Model States

Our proven model does not conclusively show that HCA Healthcare is likely to beat on earnings this to-be-reported quarter. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you can see below.

Zacks ESP: HCA Healthcare has an Earnings ESP of -0.14%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

HCA Healthcare, Inc. Price and EPS Surprise

Zacks Rank: HCA Healthcare carries a Zacks Rank #2, which increases the predictive power of ESP. However, a stock needs to have a positive ESP to be confident about a likely earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.

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

Stocks to Consider

Some stocks worth considering from the medical sector with the perfect combination of elements to surpass estimates in the next releases are as follows:

Align Technology, Inc. ALGN is set to report second-quarter earnings on Jul 25. This #1 Ranked stock has an Earnings ESP of +7.34%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes plc    ALKS has an Earnings ESP of +154.55%. This #3 Ranked company is set to report second-quarter earnings on Jul 26.

Galmed Pharmaceuticals Ltd. GLMD is set to report second-quarter 2018 earnings on Jul 30. The stock has an Earnings ESP of +6.25% and a Zacks Rank of 2.

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Alkermes plc (ALKS): Free Stock Analysis Report
 
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