Yahoo Finance Stay Ahead With 4 Healthcare Stocks Poised for Q1 Earnings Beat
The first-quarter 2024 earnings season for healthcare stocks is well underway. Early reports indicate several key growth drivers, including increased patient volumes, utilization, admissions, patient days and rate hikes, as well as growing demand for cost-effective healthcare plans and technology-enabled offerings.
These trends have notably boosted stocks in the healthcare space, which is a part of the broader Zacks Medical sector (one of the 16 broad Zacks sectors within the Zacks Industry). While there were positives, higher expenses due to increased utilization partly dampened the results. Certain HMO companies are anticipated to experience a decline in memberships, particularly in Medicaid and Medicare, as a result of redeterminations.
Additionally, investments in technological innovations and adaptions may impact companies' margins in the short term. With our unique research and deep market analysis, we've identified four healthcare stocks using the Zacks Stock Screener that show promise to exceed the Zacks Consensus Estimate for first-quarter earnings. These include The Cigna Group CI, HCA Healthcare, Inc. HCA, Avantor, Inc. AVTR and Tenet Healthcare Corporation THC.
Before delving into the specifics of what could have impacted first-quarter performance, let's examine the sector forecasts. According to the latest Earnings Trends report dated Apr 24, the medical sector is projected to experience a 7.6% decline in earnings for the first quarter, while revenues are anticipated to rise by 6.3%.
Factors at Play
The healthcare sector encompasses a vast and intricate landscape within the U.S. market. It spans across hospitals, medical services, nursing homes, health insurance, medical devices, pharmaceuticals, outpatient and home healthcare, among other industries. The expanding aging population in the domestic market and the increasing demand for health products and services are constant sales boosters for healthcare companies.
Increased patient visit volumes during the first quarter likely bolstered utilization for healthcare stocks. Coupled with higher revenue per admission, this is expected to have boosted the top lines. As more senior citizens resumed elective procedures previously postponed due to pandemic-related restrictions, volumes are expected to have received a lift. Nonetheless, heightened utilization is likely to have driven up medical costs and related expenses during the quarter, potentially impacting profit margins.
To counter the medical cost trends, some companies (like Elevance Health) are expected to have implemented premium rate hikes, which should have offered some relief. Health insurers likely benefited from product developments, technological adaptations, premium growth and increased investment income (thanks to the high interest rate environment) in the first quarter. The rising demand for affordable health products may have led to higher memberships in the commercial market for some companies during the period.
Technological advancements and innovations likely enabled hospital players to optimize services, reduce unnecessary costs and enhance the overall patient experience. Integration of AI and automation likely improved clinical workflow management and medical diagnosis within hospitals and healthcare facilities. Consequently, patients' waiting times may have been reduced, and treatment costs potentially lowered. The ongoing improvement in the labor shortage situation throughout the first quarter likely offered additional relief to healthcare players.
Picking Potential Outperformers
Identifying healthcare stocks with the potential for an earnings beat can be challenging amid the crowded investment landscape. However, our proprietary methodology simplifies this task, offering insights into potential outperformers.
These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to surpass expectations. Our research shows that for stocks with this combination, the chances of an earnings beat are as high as 70%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Our Choices
One might start with The Cigna Group, which is one of the major healthcare plan providers. Headquartered in Bloomfield, CT, the company’s first-quarter earnings are expected to have benefited from solid organic growth in specialty and care delivery and management solutions in the Evernorth Health Services unit. Premium rate hikes in Cigna Healthcare business are likely to have positioned the company for an earnings beat this time around.
The Zacks Consensus Estimate for Cigna’s first-quarter earnings is pegged at $6.17 per share, which remained stable over the past week. It beat earnings estimates in all the past four quarters, with an average of 2.9%. CI has an Earnings ESP of +0.48% and a Zacks Rank #3.
Cigna Group Price and EPS Surprise
Cigna Group price-eps-surprise | Cigna Group Quote
You may also consider Nashville, TN-based hospital operator HCA Healthcare, which has an Earnings ESP of +13.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Its first-quarter earnings are likely to have gained from growing patient volumes and occupancy rates. Growth in Medicare and Medicaid businesses will likely boost its results in the first quarter. The Zacks Consensus Estimate for HCA Healthcare’s first-quarter earnings indicates a 1.6% improvement from a year ago. The estimate remained stable over the past week. It beat earnings estimates thrice in the past four quarters and missed once, the average surprise being 9.8%.
HCA Healthcare, Inc. Price and EPS Surprise
HCA Healthcare, Inc. price-eps-surprise | HCA Healthcare, Inc. Quote
Radnor, PA-based Avantor also deserves mention. It is a global provider of mission-critical products and services for clients in the biopharma, healthcare and other industries. It has an Earnings ESP of +1.70% and a Zacks Rank #3. The consensus mark for first-quarter revenues is pegged at $1.7 billion.
The Zacks Consensus Estimate for Avantor’s first-quarter earnings is pegged at 20 cents per share. The estimate witnessed one upward revision over the past week against no movement in the opposite direction. It beat earnings estimates twice in the past four quarters, met once and missed on the other occasion, the average surprise being 3.4%.
Avantor, Inc. Price and EPS Surprise
Avantor, Inc. price-eps-surprise | Avantor, Inc. Quote
Finally, we have Dallas, TX-based Tenet Healthcare, a renowned hospital company. Improving pricing yield, expanding patient volumes and the service line are likely to have positioned THC for better-than-expected first-quarter earnings.
The Zacks Consensus Estimate for Tenet Healthcare’s bottom line for the to-be-reported is pegged at $1.45 per share, which indicates 2.1% year-over-year growth. THC has an Earnings ESP of +5.65% and a Zacks Rank #2. It beat earnings estimates in each of the past four quarters, with an average of 31.6%.
Tenet Healthcare Corporation Price and EPS Surprise
Tenet Healthcare Corporation price-eps-surprise | Tenet Healthcare Corporation Quote
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Cigna Group (CI) : Free Stock Analysis Report
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