HCA Healthcare missed Q3 earnings estimates early Friday, citing the impact of Hurricanes Helene and Milton for the miss and muted outlook for Q4. Despite the temporary disruption, HCA stock traded down sharply before the open. Universal Health Systems also took a hit, despite topping analyst estimates late Thursday.
The bout of selling in the top-tier hospital industry group started on Thursday, after Community Health Systems noted "increased patient claim denials" in its Q3 report late Wednesday.
Election concerns may also be a factor in the recent weakness. A victory by former President Donald Trump could put Medicaid funding on the chopping block, as it was during his first term.
HCA Earnings Rise
HCA earnings per share rose 25% from a year ago to $4.90, six cents below the FactSet consensus forecast. Revenue rose 8.5% to $17.49 billion, narrowly missing forecasts. The company said the two hurricanes cost it $50 million in lost revenue and additional expenses, equivalent to 15 cents a share.
For Q4, HCA said it will incur additional expenses and lost revenues of $200 million to $300 million, equivalent to a range of 60 cents to 90 cents a share. As a result, HCA said full-year EPS will likely land the lower half of its prior range of $21.60 to $22.80.
UHS Earnings Top Estimates
UHS barely edged past analyst estimates, as EPS rose 45% to $1.71. Revenue grew 11% to $3.96 billion.
In a Friday note, Barclays raised its price target for UHS stock to 271 from 256, keeping an overweight rating. The analyst touted "clean beats" for Q3 in both the behavioral health and acute care segments, despite higher malpractice and legal costs.
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Hospital Claims Denials
In a Wednesday note, Jefferies analyst Brian Tanquilut wrote that Community Health's claims denials increased in both Medicare Advantage and commercial coverage. Denials doubled from a year ago to 2% of revenue, he wrote.
He also noted that payment cycles from payors have lengthened, "impacting cash flow performance."
On the upside, Jefferies said Medicaid rate increases for Tennessee and New Mexico should "more than offset headwinds," boosting EBITDA by $100 million to $125 million a year.
HCA, UHS Stock Performance
HCA fell 7.9% to 367.19 early Friday, positioning the stock to undercut its 50-day moving average. UHS fell 6.2% to 205.34, after Thursday's 4% slide had already left it below its 50-day line.
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HCA shares ended Thursday up about 36% year to date. Humana showed a 35% advance.
