5 Hospital Stocks Set to Thrive Amid Robust Industry Trends

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The Zacks Medical-Hospital industry is benefiting from several positive trends, including growing admissions, resumption of elective procedures, technological advancements, a favorable payer mix and ...

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Although increasing salaries, benefits, and moderate staffing challenges may create some hurdles, these are expected to be largely offset by higher revenue per admission.Mergers and acquisitions (M&A) are likely to drive growth in the hospital sector as companies focus on expanding capacity to gain market share in this fragmented industry. Key players such as HCA Healthcare, Inc.HCA,Tenet Healthcare CorporationTHC, Universal Health Services, Inc. UHS, Acadia Healthcare Company, Inc.ACHC andCommunity Health Systems, Inc.CYH are well-positioned to take advantage of these trends.","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IVV":"标普500指数ETF","LU0203345920.USD":"SCHRODER ISF QEP GLB ACT. 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Although increasing salaries, benefits, and moderate staffing challenges may create some hurdles, these are expected to be largely offset by higher revenue per admission.Mergers and acquisitions (M&A) are likely to drive growth in the hospital sector as companies focus on expanding capacity to gain market share in this fragmented industry. Key players such as HCA Healthcare, Inc. HCA, Tenet Healthcare Corporation THC, Universal Health Services, Inc. UHS, Acadia Healthcare Company, Inc. ACHC and Community Health Systems, Inc. CYH are well-positioned to take advantage of these trends.\nIndustry Overview \nThe Zacks Medical-Hospital industry comprises for-profit hospital companies that provide healthcare through different types of hospitals, such as acute care, rehabilitation and psychiatric. These hospital entities are engaged in internal medicine, general surgery, cardiology, oncology, neurosurgery, orthopedics and obstetrics, telehealth services, mental health care and diagnostic and emergency services. Revenues of these companies depend on inpatient occupancy levels, medical and ancillary services ordered by physicians and provided to patients, and the volume of outpatient procedures. These hospital companies receive payments for patient services from the government under the Medicare program, Medicaid or similar programs, managed care plans (including plans offered through the American Health Benefit Exchanges), private insurers and directly from patients.\n4 Key Trends Shaping the Industry\nRising Patient Volumes: The resumption of elective procedures post-pandemic is boosting patient volumes and admissions. According to the U.S. Census Bureau's revised report, the 65+ age group will grow from 17.3% of the population in 2022 to 22.8% by 2050. This is expected to fuel demand for hospital services. Although medical inflation and rising costs remain concerns, safety nets like the Affordable Care Act could help maintain patient volume growth. Outpatient care, in particular, is expected to become one of the fastest-growing segments in the near future.\nAddressing Cost Pressures: Increasing patient volumes and utilization, along with rising costs for supplies, labor, and benefits, are pushing hospital operating expenses higher. Staffing remains a challenge, though some progress has been made. To manage these pressures, hospitals are improving labor productivity, adopting cost-optimizing technologies, and enhancing efficiency. Higher revenue per admission will help sustain margins, while renegotiated supplier contracts are expected to strengthen cost control and operational efficiency.\nEmbracing Digital Transformation: The February 2024 ransomware attack on UnitedHealth Group's Change Healthcare unit highlights the critical importance of robust technological and cybersecurity measures in healthcare. To enhance patient care, streamline workflows, and manage costs, hospitals are increasingly adopting AI, automation, and real-time analytics. These technologies will not only improve operational efficiency and patient outcomes but will also help healthcare providers maintain a competitive edge. The growth of telehealth and telemedicine, fast-tracked by the pandemic, continues to reshape and solidify its place in modern healthcare delivery.\nResurgence in M&A Activity: After a pandemic-driven slowdown, M&A in the hospital and healthcare sector has made a comeback. The industry, characterized by fragmentation, is set for a wave of M&A deals and partnerships in the coming quarters aimed at expanding capacity. Business consolidation, tech partnerships, and new business models are expected to significantly enhance profitability for hospital operators.\nZacks Industry Rank Indicates Bullish Trends\nThe group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, signals bright near-term prospects. The Zacks Medical-Hospital industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #28, which places it in the top 11% of nearly 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.\nThe industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. In fact, the industry’s earnings estimates for 2024 and 2025 have jumped 17.5% and 17%, respectively, in the past year.\nBefore we present the stocks that you may want to watch, let’s take a look at the industry’s recent stock market performance and valuation picture.\nIndustry Outperforms Sector and S&P 500\nThe Zacks Medical-Hospital industry has fared better than its broader sector and the Zacks S&P 500 composite over the past year. During this period, the stocks in this industry have gained 53.5% compared with the Zacks Medical sector’s 12.2% growth. The S&P 500 index has increased 36% during this time.\nOne-Year Price Performance\n\nIndustry's Current Valuation\nOn the basis of the trailing 12-month EV/EBITDA (Enterprise Value/ Earnings Before Interest Tax Depreciation and Amortization) ratio, which is commonly used for valuing hospital stocks, the industry trades at 8.23X compared with the S&P 500’s 18.56X and the sector’s 13.16X.\nOver the past five years, the industry has traded as high as 9.55X and as low as 5.57X, with a median of 7.99X, as the charts below show.\nEV/EBITDA Ratio (Past 5 Years)\n\n\n5 Stocks Worth Your Attention\nTenet Healthcare Corporation: The company offers a wide range of healthcare services through general hospitals and related healthcare units. It is experiencing substantial revenue growth, driven by increasing patient volumes in both its Ambulatory Care and Hospital segments. The Ambulatory Care unit, bolstered by the robust performance of its USPI division, is a key contributor to this success. Strategic tuck-in acquisitions in this unit are further strengthening the company's overall performance.\nThe Zacks Consensus Estimate for THC’s 2024 bottom line is pegged at $11.39 per share, which indicates 63.2% year-over-year growth. Tenet Healthcare beat earnings estimates in all the past four quarters, the average surprise being 59.9%. The consensus mark for 2024 revenues is pegged at $20.8 billion, signaling a 1% increase from a year ago. Shares of the company have gained 31% over the past six months. It currently sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here. \nPrice & Consensus: THC\n\nHCA Healthcare: The company runs general and acute care hospitals and related facilities. It is set for growth with increasing patient volumes and admissions. Its expansion into telemedicine is expected to enhance revenues and diversify its portfolio. Growing number of inpatient and same-facility emergency room visits are aiding its performance. HCA is scaling its business through strategic acquisitions and is committed to boosting shareholder value with dividend increases and share buybacks.\nThe Zacks Consensus Estimate for one of the biggest for-profit publicly traded hospitals’ 2024 EPS indicates 15.8% year-over-year growth. HCA Healthcare beat earnings estimates in each of the past four quarters, the average surprise being 9%. The consensus mark for 2024 revenues signals an 8.5% increase from a year ago. Shares of the company have jumped 11.7% over the past six months. It currently has a Zacks Rank #3 (Hold).\nPrice & Consensus: HCA\n\nUniversal Health Services: It operates acute care facilities, outpatient centers and behavioral health care units. It specializes in areas like autism, eating disorders, substance use disorders and military-related issues through its Patriot Support Program. It is seeing growth driven by an increase in patient days and a broadening care network. The expansion of licensed beds in acute care hospitals and strategic joint ventures in behavioral health are likely to further propel the company's growth.\nThe Zacks Consensus Estimate for Universal Health’s 2024 bottom line indicates 51.1% year-over-year growth. UHS beat earnings estimates in three of the past four quarters and missed once, the average surprise being 12.1%. The consensus mark for its 2024 revenues signals a 9.8% increase from a year ago. Shares of the company have gained 16.2% in the past six months. It has a Zacks Rank #3 at present.\nPrice & Consensus: UHS\n\nAcadia Healthcare: It delivers behavioral healthcare services across the United States and Puerto Rico. ACHC's performance is driven by rising patient volumes, increasing admissions and the expansion of service lines into new states. In 2024, Acadia plans to add over 400 beds to existing facilities and open up to 14 new CTCs. The company's dedication to enhancing its capabilities is further demonstrated by its active pursuit of joint ventures with established healthcare systems.\nThe Zacks Consensus Estimate for ACHC’s 2024 bottom line is pegged at $3.43 per share. The consensus mark for 2024 revenues signals a 7.9% increase from a year ago. It beat on earnings in each of the last four quarters, the average surprise being 3.9%. It has a Zacks Rank #3 at present. Shares of the company have declined 43% in the past six months as investors might be worried about its reduced revenue and EBITDA outlook for 2024. Due to the sale of two subscale satellite programs, its figures might decline in the short term.\nPrice & Consensus: ACHC\n\nCommunity Health Systems: It operates a network of general acute care hospitals and outpatient facilities across the United States. The company's robust performance is fueled by higher occupancy rates. With a strategic focus on telehealth, CYH is poised for long-term growth. It is pursuing acquisitions in hospitals to enhance specialty medical services and achieve economies of scale. Additionally, it is actively divesting non-core assets to boost profitability, improve same-store metrics and strengthen cash flow. The divestments might affect its nominal figures in the short term.\nThe Zacks Consensus Estimate for CYH’s 2024 bottom line indicates a 65.5% improvement from a year ago. The consensus mark for its 2024 revenues is pegged at $12.5 billion, signaling a 0.3% increase from a year ago. Shares of the company have gained 30.9% in the past six months. It has a Zacks Rank #3 at present.\nPrice & Consensus: CYH\n\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nHCA Healthcare, Inc. (HCA) : Free Stock Analysis Report\nUniversal Health Services, Inc. (UHS) : Free Stock Analysis Report\nTenet Healthcare Corporation (THC) : Free Stock Analysis Report\nCommunity Health Systems, Inc. (CYH) : Free Stock Analysis Report\nAcadia Healthcare Company, Inc. (ACHC) : Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2482975947"}