HCA Holdings: Zacks’ Bull of the Day Play

HCA Holdings (HCASnapshot Report) has seen a terrific recovery from recent lows and is basically showing the strongest signals that we have at Zacks. Estimates are moving higher after a recent beat and that has helped push the stock to a Zacks Rank #1 (Strong Buy). Today it is the Bull of the Day and worth a deeper look.Strong Signals

It is not too often that I write a Bull of the Day on a stock that is a Zacks Rank #1 (Strong Buy) that also sports the best possible style scores. HCA has a grade of “A” for the value, growth and momentum style scores. Since the inception of this new signal that investors can use, I cannot recall another time when I have seen something like this.

Description

HCA Inc. is a non-governmental hospital in the U.S. providing health care and related services. The Company operates a network of acute care hospitals, outpatient facilities, clinics and other patient care delivery settings. The Company also owns and manages freestanding surgery centers, diagnostic and imaging centers, radiation and oncology therapy centers, rehabilitation and physical therapy centers, and various other facilities. HCA Inc. is headquartered in Nashville, Tennessee.

Earnings History

I was a little surprised to see the earnings history had as many misses as it did, especially after I saw recent big beat.

The December 2015 quarter saw a surprise of 30 cents or 21% above the Zacks Consensus Estimate. Revenue was ahead of expectations for that quarter.

The previous quarter was a miss of two cents, and it was the first miss since the March 2014 quarter. The miss ended the streak of four straight beats of the Zacks Consensus Estimate.

Estimates

Earnings estimate movements are the foundation of the Zacks Rank. The recent big beat of earnings helped push this year and next year’s estimates much higher.

The Zacks Consensus Estimate for 2016 was calling for EPS of $5.81 in December of last year. Following the recent beat, the estimate jumped to $6.22.

More importantly is the move in earning estimates for the following year. The estimate moved from $6.38 to $6.81, which implies some strong earnings growth next year.

Valuation

Normally I like to highlight the growth stocks, and while there will be growth for HCA in 2016, the value players will like it even more. The forward PE for HCA is 11.4x compared to a 14.2x industry average. The stock also trades at 0.7x sales, a level that will excite most value investors.

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.

Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.

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