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Here's Why HCA Healthcare Rocketed 10.9% Higher in October

By Brian Orelli, PhD - Nov 9, 2019 at 9:09AM

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The hospital operator's third-quarter results looked robust.

What happened

Shares of HCA Healthcare ( HCA -0.88% ) jumped 10.9% in October, according to data provided by S&P Global Market Intelligence, boosted by the hospital operator's solid third-quarter results.

So what

Third-quarter revenue increased 11% year over year to $12.694 billion. Much of the increase was due to new facilities, such as the Mission Health acquisition that closed in February, but even on a same-facilities basis, revenue was up a solid 6.3%. HCA Healthcare runs a variety of facilities offering inpatient, outpatient, and emergency services, and revenues rose in all three categories.

Earnings per share, which HCA expresses after excluding gains from sales of facilities and losses from the retirement of debt, came in at $2.23, up 3.2% from the year-ago quarter's $2.16.

HCA Healthcare is a dividend stock, but it only resumed those payments to shareholders in 2018 after a long hiatus. So investors will want to watch the company's cash flows to be sure that it's positioned to continue them. In the second quarter, cash flow from operations was $2.13 billion, up 23.8% from $1.72 billion a year prior. That strong cash flow gave HCA Healthcare room to stick with its quarterly dividend of $0.40 per share.

Hospital emergency room sign

Image source: Getty Images.

Now what

Management is forecasting 2019 revenue in the $50.5 billion to $51.5 billion range, with earnings per share falling in the range of $10.35 to $10.65.

Looking further ahead, CEO Samuel Hazen said he thinks organic growth from the company's core operations should put it at the middle to high end of its long-term growth target range, and that new acquisitions should push its growth rate slightly above the top end of that range.

Sounds like HCA might need a new goal.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

HCA Healthcare, Inc. Stock Quote
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HCA
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