Hospital conglomerate HCA Healthcare (HCA -1.14%) reported its second-quarter results on Wednesday, July 25. Revenue continued to climb at a moderate pace on the back of growing admissions. At the same time, a lower tax rate and stock buybacks helped drive earnings per share up 32%.
Let's put the company's results under a microscope to find out what else went right during the period.
Image source: Getty Images.
HCA Healthcare Q2 results: The raw numbers
|
Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$11.53 billion |
$10.73 billion |
7.4% |
|
Adjusted EBITDA |
$2.23 billion |
$2.09 billion |
6.6% |
|
Net income |
$820 million |
$657 million |
25% |
|
EPS |
$2.31 |
$1.75 |
32% |
Data source: HCA Healthcare. EBITDA = earnings before interest, taxes, depreciation, and amortization.
What happened with HCA Healthcare this quarter?
- Same-facility equivalent admissions rose 2.8%.
- Operating expenses grew 7.5% during the period, slightly outpacing overall revenue growth.
- HCA recognized a tax benefit of $121 million, or $0.34 per share, during the period related to the Tax Cuts and Jobs Act.
- Cash balance at quarter end totaled $868 million. Total debt was $33.2 billion.
- Cash flows from operating activities grew 13% to $1.6 billion.
- HCA spent $470 million on stock-buybacks during the quarter. A total of 4.67 million shares were repurchased during the period. At quarter end, management still has the green light to buy back up to $910 million in additional stock.
What management had to say
CEO R. Milton Johnson kept his commentary on the quarter focused on business growth drivers:
Revenue growth driven by solid volume and rate growth combined with good expense management provided strong adjusted EBITDA growth for the quarter. This is the third consecutive quarter of a solid adjusted EBITDA growth for the company.
President and COO Samuel N. Hazen also offered investors some positive commentary on the macro environment:
HCA has now grown same-facility admissions in 17 consecutive quarters. We believe this consistent pattern of growth is a result of positive macro factors in our markets and a comprehensive growth agenda that is both well-resourced and well executed.
Looking forward
The strong quarter caused management to boost guidance for the full year 2018. Here's a look at the updated numbers and their implied growth rates:
| Metric | Updated 2018 Guidance | 2017 Actual | Implied Change (at Midpoint for Revenue) |
|---|---|---|---|
| Revenue | $45.5 billion to $46.5 billion | $43.6 billion | 5.5% |
| Adjusted EBITDA | $8.65 billion to $8.85 billion | $8.23 billion | 6.3% |
| EPS | $9 to $9.40 | $5.95 | 55% |
Data source: HCA Holdings.
This updated guidance compares favorably to the 4.3% revenue growth rate and 47% EPS growth rate that management had projected last quarter. However, management reminded investors that this range includes a $1.25 boost to EPS related to the recent changes to the U.S. tax code.
Overall, HCA's steadily improving results continue to show that the business is executing at a high level. With a large share repurchase authorization in place and a newly initiated dividend program ramping up, this business remains well positioned to continue delivering for its shareholders.
