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Will HCA Healthcare's (HCA) Earnings Beat Estimates in Q4?

We expect HCA Healthcare, Inc. HCA to surpass expectations in fourth-quarter 2017 results before the opening bell on Jan 30.

The company surpassed estimates in one of the last four quarters, with an average positive surprise of 0.4%.

Why a Likely Positive Surprise?

Our proven model shows that HCA Healthcare has the right combination of two key ingredients to beat estimates.

Zacks ESP: HCA Healthcare has an Earnings ESP of +0.24%. A stock’s positive ESP raises confidence about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

HCA Healthcare, Inc. Price and EPS Surprise

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

Zacks Rank: HCA Healthcare carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of an earnings beat.

Conversely, we caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Driving the Better-Than-Expected Earnings

The company’s revenues have been rising over the past few years on the back of accretive acquisition of other hospitals. Continuing the trend, patient admissions are expected to grow further in the fourth quarter, driving the top line. The Zacks Consensus Estimate for total admissions, one of the key revenue drivers, (representing the total number of patients admitted to the company’s hospitals and is a general measure of inpatient volume) is 497,000, which reflects year-over-year growth of 4.6%. The Zacks Consensus Estimate for in patient revenue per admission is pegged at $13,433, up 2.5% year over year.

The company has been deploying capital in terms of share repurchases to enhance investors’ value. Share buyback programs taken up during the fourth quarter are likely to favor the bottom line, limiting the share count.

However, the company’s fourth-quarter results are expected to suffer from the industry-wide softness in volumes. Factors like payor initiatives to move volumes away from hospitals, rising deductibles and prevalence of high deductible health plans, and increased proportion of hospital care to be paid by consumers are likely to lower volumes.

Operating expenses per equivalent admission are also likely to increase in the fourth quarter driven by higher admissions.

Other Stocks to Consider

Here are some other companies from the health care sector that you may want to consider as these have the right combination of elements to beat on earnings in the fourth quarter:

Centene Corp. CNC has an Earnings ESP of +1.24% and a Zacks Rank of 1. The company is set to report earnings on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aetna, Inc. AET is also set to report earnings results on Jan 30 with an Earnings ESP of +0.27% and a Zacks Rank #3.

Anthem Inc. ANTM has an Earnings ESP of +1.29% and a Zacks Rank #1. The company is set to report financial results on Jan 31.

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