HCA Healthcare Is On Path To 'Multi-Year Margin Expansion': Bullish Analyst Shows Confidence

  • Cantor Fitzgerald initiated coverage on HCA Healthcare Inc HCA under a broader coverage of 15 companies in the Healthcare Services sector.
  • The analyst takes the price target of $304 with an Overweight rating.
  • The analyst writes that contract negotiating power could be crucial to margin expansion, which, in turn, could increase the importance of HCA's position as a market-share leader in the acute hospital space. 
  • Cantor analyst writes that the company's well-capitalized balance sheet positions it to achieve market-share gains in 2023. It is viewed as a challenging environment for smaller hospitals affected by rising interest rates, labor inflation, and increasing technology investment needs. 
  • Though today's HCA Q1 earnings demonstrated some easing of staffing issues, as it reported better-than-expected earnings.
  • Cantor says contract labor expenses could fall further in 2Q23.
  • The current 8.9x 2024E EV/EBITDA, a 4% discount to the stock's historical five-year average, reflects the challenges of the price-to-cost spread over 2021-23 and the runway of procedures shifting from acute to lower EBITDA per surgical case in outpatient settings.
  • The analyst says its price target reflects confidence in HCA's multi-year margin expansion.
  • Price Action: HCA shares are up 3.56% at $280.10 on the last check Friday.
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