Recession fears, inflation, and aggressive monetary policy continue to affect the stock market’s performance. However, irrespective of broader economic conditions, medical stocks tend to be recession-resistant and usually perform well due to the inelastic demand for medical products and services.
Moreover, growing competition and technological innovations and adoptions are expected to continue boosting hospital companies’ efficiency in the upcoming term. On top of it, an aging population and increasing prevalence of chronic diseases will likely brighten the industry’s prospects.
The global healthcare services market is expected to grow from $7.50 trillion in 2022 to $7.98 trillion in 2023 at a CAGR of 6.3%. Further, the market is projected to grow to $9.82 trillion in 2027 at a CAGR of 5.3%.
Given this industry’s resilience and long-term growth prospects, fundamentally strong hospital stocks HCA Healthcare, Inc. (HCA) and Universal Health Services, Inc. (UHS) could be wise additions to your portfolio in 2023.
HCA Healthcare, Inc. (HCA)
HCA is a healthcare services company that owns and operates general and acute care hospitals offering medical, surgical, emergency, and outpatient services. In addition, the company operates in two geographically organized groups: The National and American Groups.
On December 13, 2022, HCA announced its enterprise-wide adopted Enhanced Surgical Recovery (ESR) program. The ESR program is a patient-centered, research-based, and multidisciplinary approach to surgical recovery and has been adopted by 167 HCA Healthcare facilities. This might be beneficial for the company.
For the fiscal fourth quarter that ended December 31, 2022, HCA’s revenues increased 2.9% year-over-year to $15.50 billion. Its adjusted EBITDA amounted to $3.18 billion, compared to $3.15 billion in the prior-year quarter. In addition, net income attributable to HCA and EPS came in at $2.08 billion and $7.28 per share, up 14.7% and 26.6% year-over-year, respectively.
Analysts expect HCA’s revenue and EPS for the current fiscal year (ending December 2023) to increase 4% and 3% year-over-year to $62.65 billion and $17.40, respectively. The stock has gained 19.2% over the past six months to close the last trading session at $253.30.
HCA’s strong fundamentals are reflected in its POWR Ratings. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a B grade for Value, Stability, and Quality. Among the 12 stocks in the Medical - Hospitals industry, it is ranked first. Click here to see the other ratings of HCA for Growth, Momentum, and Sentiment.
Universal Health Services, Inc. (UHS)
UHS owns and operates acute care hospitals and outpatient and behavioral health care facilities. It provides services, which include general and specialty surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services, and behavioral health services.
On January 13, 2023, the company’s board of directors announced a dividend of $0.20 per share, payable on March 15, 2023. UHS’ annual dividend of $0.80 yields 0.55% at the current price level. Its dividend payouts have increased at a 10.1% CAGR over the past three years and a 14.9% CAGR over the past five years.
In the third quarter that ended September 30, 2022, UHS’ total revenues increased 5.7% year-over-year to $3.33 billion. Its adjusted net income and adjusted earnings per share came in at $185.79 million and $2.54, respectively, for the same period.
The consensus EPS estimate of $2.97 for the fourth quarter (ended December 31, 2022) represents a marginal improvement year-over-year. The consensus revenue estimate of $3.40 billion for the previous year represents a 3.7% increase from the prior-year period. UHS has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 29.1% over the past six months to close the last trading session at $145.16.
It is no surprise that UHS has an overall rating of B, which translates to Buy in our proprietary rating system. Also, it has a B grade for Value and Sentiment. Within the same industry, it is ranked #3 of 12 stocks.
Beyond what we’ve stated above, we’ve also rated UHS for Growth, Momentum, Stability, and Quality. Get all UHS ratings here.
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HCA shares were trading at $253.65 per share on Tuesday afternoon, up $0.35 (+0.14%). Year-to-date, HCA has gained 5.71%, versus a 5.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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