Hospital Facilities To Face Slower Earnings Growth In 2023, Analyst Says While Initiating Coverage On Two Large Stocks - Tenet Healthcare (NYSE:THC)

J.P. Morgan initiated coverage on Universal Health Services Inc UHS with a Neutral rating and a price target of $133 and Tenet Healthcare Corp THC with an Overweight rating and a price target of $72.
The analyst also assumed coverage of HCA Healthcare Inc HCA with a Neutral rating and a price target of $283.
The analyst says 2023 will be a down year for margins with slower earnings growth as hospitals face tougher comps from lower Covid volumes and favorable Covid revenue items in 2022, partially offset by more favorable commercial reimbursement and moderating labor costs.
However, trends are expected to improve over 2023, with a potential for modest margin expansion in 2024. The analyst writes that reimbursement could remain a tailwind for hospitals as volume and cost trends normalize.
THC's current valuation overly discounts near-term operational headwinds. The analyst says THC's reduced leverage and stronger FCF offer investors a relatively more attractive risk/ reward profile than peers.
Also Read: Tenet Healthcare Beats Wall Street Estimates In Q4, Issues Underwhelming Guidance.
For UHS, the analyst writes that 2023 is a transition year. Behavioral growth and margins are expected to recover faster than the acute business, where lighter-than-expected volumes and acuity mix will result in margins flat to slightly down y/y.
Related: Universal Health Services Annual Profit Outlook Falls Short Of Expectations, Shares Tumble.
Price Action: THC shares are up 0.17% at $66.46 and UHS shares are up 0.27% at $137.17 on the last check Wednesday.

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