Wrapping up Q3 earnings, we look at the numbers and key takeaways for the hospital chains stocks, including Universal Health Services (NYSE:UHS) and its peers.
Hospital chains operate scale-driven businesses that rely on patient volumes, efficient operations, and favorable payer contracts to drive revenue and profitability. These organizations benefit from the essential nature of their services, which ensures consistent demand, particularly as populations age and chronic diseases become more prevalent. However, profitability can be pressured by rising labor costs, regulatory requirements, and the challenges of balancing care quality with cost efficiency. Dependence on government and private insurance reimbursements also introduces financial uncertainty. Looking ahead, hospital chains stand to benefit from tailwinds such as increasing healthcare utilization driven by an aging population that generally has higher incidents of disease. AI can also be a tailwind in areas such as predictive analytics for more personalized treatment and efficiency (intake, staffing, resourcing allocation). However, the sector faces potential headwinds such as labor shortages that could push up wages as well as substantial investments needs for digital infrastructure to support telehealth and electronic health records. Regulatory scrutiny, and reimbursement cuts are also looming topics that could further strain margins.
The 4 hospital chains stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 1.9%.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 7.9% since the latest earnings results.
Universal Health Services (NYSE:UHS)
With a network spanning 39 states and three countries, Universal Health Services (NYSE:UHS) operates acute care hospitals and behavioral health facilities across the United States, United Kingdom, and Puerto Rico.
Universal Health Services reported revenues of $4.50 billion, up 13.4% year on year. This print exceeded analysts’ expectations by 2.8%. Overall, it was a strong quarter for the company with an impressive beat of analysts’ full-year EPS guidance estimates and a beat of analysts’ EPS estimates.
Universal Health Services achieved the fastest revenue growth of the whole group. Unsurprisingly, the stock is up 4.1% since reporting and currently trades at $222.90.
Is now the time to buy Universal Health Services? Access our full analysis of the earnings results here, it’s free for active Edge members.
Best Q3: HCA Healthcare (NYSE:HCA)
With roots dating back to 1968 and a network spanning 20 states, HCA Healthcare (NYSE:HCA) operates a network of 190 hospitals and 150+ outpatient facilities providing a full range of medical services across the US and England.
HCA Healthcare reported revenues of $19.16 billion, up 9.6% year on year, outperforming analysts’ expectations by 3.3%. The business had a very strong quarter with an impressive beat of analysts’ full-year EPS guidance estimates and a beat of analysts’ EPS estimates.
HCA Healthcare pulled off the biggest analyst estimates beat and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 6.3% since reporting. It currently trades at $468.05.
Is now the time to buy HCA Healthcare? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: Acadia Healthcare (NASDAQ:ACHC)
With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ:ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.
Acadia Healthcare reported revenues of $851.6 million, up 4.4% year on year, exceeding analysts’ expectations by 0.7%. Still, it was a slower quarter as it posted a significant miss of analysts’ full-year EPS guidance estimates and full-year EBITDA guidance missing analysts’ expectations.
Acadia Healthcare delivered the weakest full-year guidance update in the group. As expected, the stock is down 33.4% since the results and currently trades at $13.77.
Read our full analysis of Acadia Healthcare’s results here.
Tenet Healthcare (NYSE:THC)
With a network spanning nine states and serving primarily urban and suburban communities, Tenet Healthcare (NYSE:THC) operates a nationwide network of hospitals, ambulatory surgery centers, and outpatient facilities providing acute care and specialty healthcare services.
Tenet Healthcare reported revenues of $5.29 billion, up 3.3% year on year. This result beat analysts’ expectations by 0.6%. Zooming out, it was a satisfactory quarter as it also produced a beat of analysts’ EPS estimates but same-store sales in line with analysts’ estimates.
Tenet Healthcare had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 8.6% since reporting and currently trades at $197.48.
Read our full, actionable report on Tenet Healthcare here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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