What happened

In response to the second-quarter earnings report, shares of HCA Healthcare (HCA -0.35%), a for-profit hospital conglomerate, dropped as much as 12% in early morning trading on Tuesday. Shares were down about 9% as of 11:35 a.m. EDT.

So what

Here are the headline numbers from the quarter:

  • Sales jumped 9.5% to $12.6 billion. That was a hair shy of the $12.61 billion that Wall Street was looking for. 
  • Adjusted EBITDA grew slightly to $2.29 billion.
  • Same-facility admissions increased by 2.1%. Same-facility revenue per equivalent admission increased by 1.7%.
  • Operating costs were $10.32 billion, or 81.9% of revenue. That was 110 basis points higher than the year-ago period. 
  • The elevated expenses caused net income to drop 5% to $783 million, or $2.25 per share. That was below the $2.46 that Wall Street expected.
  • Management spent $242 million to repurchase 1.928 million shares of its common stock. The company still has the green light to buy back another $1.753 billion in shares.
  • A dividend of $0.20 was declared.
Hospital Emergency Room Outside Shot Building

Image source: Getty Images.

While the quarterly numbers came in a bit light, management actually boosted its guidance for the full year:

Metric

 Previous Guidance Updated Guidance
Revenue $50.5 billion to $51.5 billion $50.5 billion to $51.5 billion
Adjusted EBITDA $9.45 billion to $9.85 billion $9.6 billion to $9.85 billion
EPS $9.80 to $10.40 $10.25 to $10.65

Data source: HCA Healthcare.

For context, Wall Street was expecting $50.97 billion in revenue for the full year and $10.41 in EPS. While the midpoint of management's new guidance is above this range, traders appear to be squarely focused on the weak quarterly results.

Now what

HCA's quarterly results weren't great, but there are several positive takeaways for investors. Revenue continues to grow at a strong rate, management continues to buy back lots of stock, and profit guidance was raised for the full year. Management wouldn't have boosted its full-year profit guidance if it thought that the elevated costs were here to stay. That suggests that margins will improve in the back half of the year. 

In other words, the long-term thesis for owning this stock continues to look strong, even though the share movement today suggests otherwise.