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HCA Healthcare (HCA) Q2 Earnings: Will it Beat Estimates?

HCA Healthcare, Inc. HCA is scheduled to report second-quarter 2017 results on Jul 25, before the market opens.

Last quarter, this hospital company posted in-line results. It has, however, surpassed earnings estimates in three out of the last four quarters with an average positive surprise of 6.47%.

Let’s see how things are shaping up for this announcement.

Q2 Flashback

The company’s commercial volumes have been stressed over the past few quarters. It has taken  efforts to build out its local networks and create greater patient access both from an outpatient facilities standpoint and a digital media standpoint to address the issue. We, however, don’t expect to see any major improvement in this business in the second quarter.

Last quarter, the company reported the 12th consecutive quarter of equivalent admission growth for HCA and we expect the trend to continue in the second quarter.

HCA Healthcare consistently makes capital expenditure for the expansion of services and capacity in its large fast growing urban markets. In 2016, it incurred $2.76 billion in this regard and expects to invest $2.9 billion in 2017. The company has also made a number of acquisitions over the past many years to expedite growth. We believe these investments will generate top-line growth by increasing business volumes.

Share bought back by the company during the to-be reported will cushion the bottom line. The company has not paid regular dividend since its IPO in 2011. It prefers share buyback over dividend payment for allocating capital and will maintain its current policy on dividend payouts.

HCA Holdings, Inc. Price and EPS Surprise

HCA Holdings, Inc. Price and EPS Surprise | HCA Holdings, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that HCA Healthcare is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: HCA Holdings has an Earnings ESP of -2.78%. This is because the Most Accurate estimate stands at $1.75 per share, below the Zacks Consensus Estimate of $1.80.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: HCA Holdings carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a negative Earnings ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies in the healthcare sector that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Gilead Sciences, Inc. GILD is expected to report second-quarter 2017 earnings results on Jul 26. The company has an Earnings ESP of +3.32% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. .

Celgene Corporation CELG has an Earnings ESP of +0.62% and a Zacks Rank #3. The company is expected to report second-quarter earnings results on Jul 27.

Pfizer Inc. PFE has an Earnings ESP of +1.54% and a Zacks Rank #3. The company is expected to report second-quarter earnings results on Aug 1.

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