HCA Healthcare's share price up after Q3 revenue, earnings beat expectations

HCA Healthcare
HCA Healthcare

Nashville-based hospital giant HCA Healthcare's shares jumped more than 6% on Tuesday after reporting an 11% jump in revenue in its third-quarter earnings.

HCA reported its revenues to $12.7 billion in the third quarter ending September 30, compared to $11.4 billion in the third quarter of 2018. 

Meanwhile, the company reported a dip in profits in the third quarter as net income attributable to HCA Healthcare totaled $612 million, or $1.76 per diluted share, compared to $759 million, or $2.15 per diluted share, in the third quarter of 2018. The 2019 quarter included losses on retirement of debt of $211 million, or $0.47 per diluted share.

Still, HCA's third-quarter 2019 earnings beat Wall Street's expectations and revenue beat forecasts by $210 million.

Samuel Hazen, CEO of the health system, said during an earnings call that the company's revenue growth was driven by strong same-facilities growth in volume—the strongest HCA has seen in the past 17 quarters—and revenue from recent acquisitions.

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HCA's admissions grew by nearly 6% year-over-year, totaling 527,284 in the third quarter. The company also reported same facility admissions increased nearly 3.2% in the third quarter of 2019 compared to the prior-year period, while same facility emergency room visits increased 4.1% in the third quarter of 2019, according to William Rutherford, executive vice president chief financial officer.

The company also reported same facility inpatient surgeries increased 2.2% and same facility outpatient surgeries increased 2.6% in the third quarter of 2019, compared to the same period of 2018.

Same facility revenue per equivalent admission increased 2% percent in the third quarter of 2019, compared to the third quarter of 2018.

Hazen noted that HCA has grown its same facilities inpatient admissions for 22 consecutive quarters.

"We had the broadest-based volume performance as far as positive metrics that I have seen in almost three years. Only two areas that were flat from an admissions standpoint—behavioral health was flat and outpatient surgery centers were modestly up. Our hospital-based outpatient surgeries were very strong," he said. "That speaks to the overall growth agenda that the company has had for years and we think is appropriate as we look forward."

HCA reported its cash flows from operating activities were $2.1 billion, compared to $1.7 billion in the prior year’s third quarter. During the third quarter of 2019, capital expenditures totaled $1.1 billion, excluding acquisitions. 

During the call, officials announced a cash dividend of $0.40 per share to their shareholders. 

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HCA completed several acquisitions recently. That included Mission Health, a seven-hospital system in Asheville and western North Carolina, for approximately $1.5 billion. Other acquisitions include the addition of Memorial Health in Savannah and North Cypress in Houston last year.

"The strategic investments we are making in our business to expand our network and improve clinical capabilities are creating greater accessibility for patients to receive high quality and convenient patient care in an HCA healthcare facility," Hazen said.

"Our capital expenditures have been aimed at increasing capacity, clinical technology and building out our ambulatory network," Hazen said.

HCA is currently running at 73% occupancy levels on the inpatient side, he said. "We’re adding more beds than we did in the previous year. In 2020, we’re anticipating a similar amount coming online as we did in 2019."

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HCA executives expect the company's core operations to grow organically near the mid and the upper part of its long-term growth expectations, Hazen said. "We believe acquisitions will push our growth rate slightly above the top of our long-term growth expectations," he said.

"We believe the overall fundamentals in our market and primary drivers of growth remain strong. We are well-positioned to capitalize on this favorable environment as we continue to execute our operational initiatives, improve the competitive position of our networks with capital spending and integrate our acquired hospitals," he said.

HCA increased its 2019 guidance with adjusted EBITDA expected to range between $9.7 billion and $9.9 billion and earnings per share expected to range between $10.30 and $10.65 per diluted share. 

The company is projecting yearly revenue from $50.5 billion to $51.5 billion in 2019.