HCA Blasts Out Of Buy Zone On Earnings, Other Hospitals Hot

HCA Healthcare (HCA) reported second-quarter earnings that blew past analyst estimates as the hospital operator sharply raised full-year guidance on the continued rebound in surgeries and emergency-room visits. HCA stock, which had been in buy range, shot higher at the open.


Other hospital stocks, including Tenet Healthcare (THC) and Community Health Systems (CYH), also jumped, flashing buy signals ahead of their earnings reports.

“With the effects of the pandemic moderating in the second quarter, we experienced a strong rebound in demand for health care services,” said Sam Hazen, Chief Executive Officer of HCA Healthcare.

HCA Healthcare Earnings

HCA earnings rose 38% to $4.36 a share, beating Wall Street estimates by $1.20 a share. Revenue grew 30% to $14.4 billion, a dramatic recovery from last year’s figure, which was depressed by Covid restrictions.

The unwinding of those restrictions helped fuel a 40.5% increase in emergency-room visits and a 52.5% rise in outpatient surgeries, on a same-facility basis vs. a year ago.

HCA boosted full-year EPS guidance to a range of $16.30-$17.10, up from the prior range of $13.30-$14.30.

HCA Stock

HCA stock dipped 0.7% lower on Monday at 217.63, rallying to close just above a 217.56 buy point from a flat five-week base, according to MarketSmith. After the dramatic hike to full-year guidance early Tuesday, HCA stock bolted out of the gate, surging 14% to 248.90.

That blasted HCA well past the 5% chase zone, which ran through 228.51. So is HCA stock too hot to touch now?

There are a few things to consider. A breakaway gap, such as HCA’s on Tuesday, can be seen as a buying opportunity for growth stocks. In that case, the price high during the first five minutes of trading serves as the new buy point.

HCA stock hit a high of 249.58 in the opening minutes. Investors playing the breakaway gap could pick up shares as HCA stock moves past that point.

HCA does have some growth tailwinds with the aging of the U.S. population, which is contributing to a higher acuity among the inpatient population. Meanwhile, HCA is investing in growth via expanding outpatient surgical centers, home health, inpatient rehab and urgent care.

HCA also is a leading stock in a top-performing group. The Medical-Hospitals group is ranked No. 12 out of 197 industry groups by IBD based on stock performance and momentum.

Still, HCA stock doesn’t have the rapid growth profile generally suited for a breakaway-gap play. Further, the current market trend, tracked by the daily afternoon The Big Picture column, offers reason for caution.

Other Hospital Stocks

Other hospital stocks got a solid lift from HCA’s results.

Tenet Healthcare rallied 9.1% to 70.52. THC stock reached 71.75 intraday, briefly clearing a 70.85 buy point from a flat six-week base. However, Tenet reports earnings after the close on Wednesday, which creates risk for new buys. IBD introduced an options strategy to handle volatility around earnings.

Community Health Systems jumped 9.6% to 15.59, retaking its 10-week moving average but off intraday highs of 16.41 For leading stocks, the rebound after a test of its 10-week line can provide an entry point. CYH stock, with a 92 IBD Composite Rating would appear to qualify. Investors could use this as an early entry on a short consolidation that should be a conventional base with a 17.14 buy point after this week.

Universal Health Services (UHS) advanced 4.3% to 153.17, climbing to within about 4% of a 162.61 buy point. UHS stock broke above its 50-day line intraday but closed below it.

However, both Community Health and Universal Health are due to report earnings next week.


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