This Hospital Stock Gets A 9% Price Target Bump On Fine Tuned Labor Trends Assumptions

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  • Raymond James has HCA Healthcare Inc HCA raised its 2023 adj. EBITDA from $12.4 billion to $12.8 billion, thus increasing the price target to $250 from $230 with a reiterated Outperform rating.
  • The catalyst for the revised view is:
    • Detailed analysis of labor trends.
    • An analytical framework based on 2Q22, a pretty clean quarter with only ~$25M of additional COVID support payments, which the analyst assumes will disappear in 2023. 
  • Despite being $200 million above the Street consensus, Raymond James believes the assumptions to be conservative.
  • Related: Investors Cheer Better-Than-Expected HCA Healthcare's Q2 Earnings.
  • The $12.8 billion estimate assumes core growth of just 2% off the Q2 adjusted baseline due to fewer extra-COVID support payments, despite expected pricing strength from both Medicare and commercial.
  • The analyst continues to like HCA, the bellwether hospital provider, due to its notable combination of above-market 2023 EPS growth of 14.5% vs. below-market 2023 P/E multiple of 10.6x.
  • Price Action: HCA shares are down 0.45% at $208.04 on the last check Friday.
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