HCA Outlook Drives Hospital Sector Stocks
Tuesday March 29, 4:28 pm ET
HCA's First-Quarter Outlook Drives Confidence in Hospital Sector, Sending Stocks Higher
NEW YORK (AP) -- Hospital company stocks rallied Tuesday as a positive first-quarter outlook from HCA Inc. added to growing confidence in the sector.
Late Monday, HCA forecast first-quarter earnings of 88 cents to 93 cents up from 69 cents last year and disclosed plans to sell 10 hospitals in six states. HCA and a number of other stocks in the sector were propelled to new 52-week highs on the news.
HCA shares rose $3.08, or 6.3 percent, to close at $51.95 on the New York Stock Exchange on about seven times their average trading volume. The stock hit and intraday high of $52.99, topping a previous 52-week high of $49.75. Triad Hospitals and Universal Health Services also hit new highs.
However, two Wall Street analysts differed on whether HCA's gains would have staying power.
Prudential analyst David Shove said that the improved patient volume and greater number of patients who pay their bills cited by HCA in its outlook signaled improving fundamentals at the Nashville, Tenn. hospital operator that could indicate a rosier picture for the hospital sector as a whole.
"Based on the 1Q05 earnings guidance, HCA seems to be making major progress in restoring its financial strength that appears to be sustainable," Shove said in a research note.
Prudential raised its estimate for 2005 earnings per share to $3.30 from $2.73 and for 2006 earnings per share to $3.76 from $3.15, while raising its price target for the stock to $53 from $42.
Analysts surveyed by Thomson First Call are looking for earnings per share of 76 cents per share in the first quarter, $2.85 for all of 2005, and $3.23 in 2006.
Bear Stearns analyst Jason Gurda also raised his price target for HCA, to $55 from $50, but he tied HCA's improved first-quarter outlook more to seasonality than to fundamentals.
"We expect HCA will trade up in anticipation of rising guidance and estimates," Gurda said in his note. "However, the stock may become overextended, in our view, as some may assume the 1Q upside indicates a secular improvement in HCA's operating environment, not just normal seasonality. We are concerned that some investors expecting dramatic upside in the remainder of '05 may be disappointed when HCA revises guidance."
The investment firm boosted its first-quarter earnings outlook for HCA by 14 cents to 91 cents per share, but only raised it outlook for full-year 2005 earnings per share by 11 cents to $2.99.
In afternoon trading on the NYSE, Tenet Healthcare Corp. shares rose 53 cents, or 4.7 percent, to $11.72; shares of Province Healthcare Co. rose 56 cents, or 2.4 percent, to $24.04 and topped a previous 52-week high of $23.58; Triad Hospitals Inc. shares rose $2.97, or 6.4 percent, to $49.57, eclipsing a 52-week high of $46.66; shares of Universal Health Services Inc. rose $1.47, or 2.9 percent, to $51.59, and hit a new yearly high of $52.85 during the session; and Community Health Systems Inc. shares rose 78 cents, or 2.3 percent, to $34.83.
On the Nasdaq, LifePoint Hospitals Inc. shares rose $2.06, or 4.9 percent, to close at $43.92. |
