HCA Healthcare (NYSE:HCA), a leading operator of hospitals, reported its third-quarter results on Tuesday, Oct. 30. Modest gains in admission rates allowed the company's top line to continue to lurch forward.

However, the company was able to translate the steady gains into strong growth on the bottom line, thanks to expense control and favorable changes to the tax code.

Exterior of a medical office building reading Outpatient Surgery

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HCA Healthcare Q3 results: The raw numbers


Q3 2018

Q3 2017

Year-Over-Year Change


$11.45 billion

$10.70 billion


Adjusted EBITDA

$2.1 billion

$1.8 billion


Net income

$759 million

$426 million


Earnings per share




Data source: HCA Healthcare. EBITDA = earnings before interest, taxes, depreciation, and amortization.

What happened with HCA Healthcare this quarter?

  • Same-facility equivalent admissions increased by 3.4%.
  • Operating expenses were 81.8% of revenue, a 170-basis-point decrease over the year-ago period.
  • HCA reported a tax benefit of $132 million, or $0.37 per share.
  • Cash flows from operating activities increased 70% to $1.7 billion.
  • The company spent $302 million on stock buybacks during the period; it still has the authorization to buy back another $607 million worth of stock.
  • CEO R. Milton Johnson stated that he was stepping down as of Jan. 1, 2019. Sam Hazen, HCA's current president and chief operating officer, will take over the top chair at that time.

What management had to say

On the call with investors, incoming CEO Hazen heaped praise on the performance of outgoing CEO Johnson.

Given the leadership change, Hazen felt it was appropriate to provide investors a look at the guidance for 2019:

An early look at 2019 indicates that we expect solid volume growth again, and an adjusted EBITDA growth rate somewhere within a reasonable range of this year's currently expected full-year growth rate. As we always do at HCA, we will challenge ourselves to find opportunities to enhance performance.

Looking forward

The strong quarterly results caused management to raise its guidance for the year yet again. Here's what the updated numbers look like:

Metric Updated 2018 Guidance 2017 Actual Implied Change (at Midpoint for Revenue)
Revenue $46 billion to $47 billion $43.6 billion 6.6%
Adjusted EBITDA $8.7 billion to $8.9 billion $8.23 billion 7.3%
EPS $9.05 to $9.45 $5.95 55%

Data source: HCA Healthcare.

With sales and earnings on the rise, Johnson appears to be handing over the reins at a great time in HCA's history. In response to the prosperity, he ended his prepared remarks on the conference call by reassuring shareholders that the company will be well-cared-for after his departure:

This is a wonderful company, with many talented people who are committed to the delivery of high-quality patient care and operational excellence. I am extremely proud of the many accomplishments we've achieved as a team, including advancing the company's clinical agenda, which focuses on the delivery of high-quality patient care and improving patient satisfaction. HCA is well-positioned for the future under Sam's leadership, and I remain excited about the company's future.

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