Market Overview

Spotlight on Hospital Stocks (CYH, HCA, THC, UHS)

The hospital stocks featured here have seen some large gains, but a research call from J.P. Morgan Chase & Co. (NYSE: JPM) earlier today sees even more upside in the industry. Community Health Systems (NYSE: CYH), HCA Holdings (NYSE: HCA), Tenet Healthcare (NYSE: THC) and Universal Health Services (NYSE: UHS) were all initiated with Overweight ratings and price targets higher than the consensus estimate.

The analyst also started Lifepoint Hospitals (NASDAQ: LPNT) at Overweight, but saw less potential upside in Health Management Associates (NYSE: HMA) and Vanguard Health Systems (NYSE: VHS). They both were started with Neutral ratings.

Community Health Systems

This Franklin, Tennessee-based provider of hospital health care services has a market capitalization of about $2.8 billion. The long-term earnings per share (EPS) growth forecast is more than 14 percent, and the price-to-earnings (P/E) ratio is less than the industry average. But the return on equity is only about nine percent. The short interest was more than five percent of the float at the November 30 settlement date.

Only 10 of the 22 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares, though none recommend selling. Their mean price target, or where they expect the shares to go, is hardly any higher than the current share price. But J.P. Morgan's new $38 target represents more than 16 percent upside.

If one ignores a brief spike in the share price following the presidential election, the stock would be currently trading near a 52-week high. The share price is about 76 percent higher year to date. The stock has outperformed the likes of HCA Holdings and Lifepoint Hospitals over the past six months.

HCA Holdings

This owner and operator of hospitals and other health care facilities sports a market cap of about $14 billion. It is headquartered in Nashville. Its P/E ratio is much lower than the industry average, and the long-term EPS growth forecast is more than 11 percent. The operating margin is higher than the industry average and the return on investment is almost 18 percent. The short interest is more than three percent of the float, the second highest number of shares sold short this year.

All but three of the 24 analysts surveyed recommend buying shares; nine of them rate the stock at Strong Buy. They believe the stock still has some room for growth, as their mean price target is more than 11 percent higher than the current share price. J.P. Morgan's $39 target represents about 18 percent potential upside.

Despite pulling back a bit in the past week following the announcement of a secondary offering, shares are more than 44 percent higher year to date. But the stock has underperformed competitors Health Management Associates (NYSE: HMA) and Tenet Healthcare over the past six months, though it has outperformed the S&P 500.

Tenet Healthcare

This Dallas-based health care services company has a market cap near $3.5 billion and reached a new 52-week high today. The forward earnings multiple is less than the industry average P/E ratio. The long-term EPS growth forecast is more than 12 percent, but the return on equity is more than 7 percent. The short interest is almost eight percent the float, the second highest number of shares sold short this year.

All but five of the 21 polled analysts recommend holding shares, but none recommends selling. J.P. Morgan's $41 target represents about 20 percent potential upside and is a level shares have not seen since 2005.

The share price is more than 61 percent higher than six months ago. The stock has outperformed competitors HCA Holdings and Universal Health Services, as well as the broader markets, over the past six months.

Universal Health Services

The market cap of this owner and operator of hospitals and health care centers is about $4.5 billion, and the company offers a dividend yield near 0.4 percent. The P/E and PEG ratios are a lower than the industry average, and the long-term EPS growth forecast is more than 23 percent. It has a return on equity of more than 16 percent. Shares sold short are a little over one percent of the float.

Of the 18 analysts polled, 16 rate the stock at Buy or Strong Buy. The $59 price target set by J. P. Morgan today is more than 18 percent higher than the current share price. The share price has not been above $50 since July of 2011.

This stock also spiked right after the presidential election, and shares have almost reclaimed that level after rising about eight percent in the past month. Over the past six months, the stock has outperformed the broader markets but underperformed competitors Community Health Systems and HCA Holdings.

Posted-In: community health systems HCA Holdings health management associates J.P. Morgan lifepoint hospitals tenet healthcare Universal Health Services Vanguard Health SystemsLong Ideas Short Ideas Initiation Analyst Ratings Trading Ideas Best of Benzinga

 

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