HCA Healthcare Conference Call Summary Company Overview - **Company**: HCA Healthcare (NYSE:HCA) - **Date**: November 12, 2025 - **Speaker**: Michael Marks, Executive Vice President and Chief Financial Officer Key Points Industry and Market Performance - The healthcare services market is experiencing strong demand, with HCA Healthcare's network development and capital investment programs leading to improved competitive positioning and market share growth [2][4][5] - HCA Healthcare operates in 43 markets with population growth above the U.S. average, contributing to confidence in maintaining volume growth in the 2-3% range for the upcoming year [5][6] Financial Performance - HCA Healthcare reported a solid financial performance through the first three quarters of 2025, with overall margin performance being strong [4] - The company anticipates a capital investment of $5 billion in 2025, focusing on expanding and optimizing healthcare networks [5][37] Volume and Demand Insights - Volume growth expectations for 2025 have been adjusted to 2-3%, down from initial expectations of 3-4% due to lower-than-expected performance in Medicaid and self-pay segments [4][5] - There has been no significant evidence of a rush for last-minute surgeries as the year-end approaches, indicating stable demand patterns [7][12] Payer Mix and EPTC Impact - The expiration of Enhanced Premium Tax Credits (EPTCs) could influence payer mix, with potential shifts back to employee-sponsored insurance or an increase in uninsured individuals [10][11] - HCA Healthcare estimates that the transition from exchanges may take two to three years to stabilize, with ongoing healthcare service utilization expected even among the uninsured [11][12] Supplemental Payments and State Applications - HCA is awaiting approval for supplemental payments from states like Florida and Georgia, which could provide significant financial support through 2028 [16][17][18] - The company estimates a potential EBITDA tailwind of approximately $700 million from these pending applications [19] Labor and Professional Fees - Clinical labor is currently stable, with improvements in workforce development contributing to better retention and operational efficiency [26][27] - Professional fees have increased by about 11% this year, primarily due to challenges in anesthesia and radiology services [29][30] Capital Allocation and Investments - HCA Healthcare plans to allocate 45%-55% of its capital investments back into facilities, with a current pipeline of $6.7 billion in projects [43][44] - The company is actively pursuing mergers and acquisitions, particularly in the outpatient care sector, to enhance network development [39][44] Digital Transformation and AI Initiatives - HCA is investing in digital transformation, focusing on AI applications across clinical, operational, and administrative domains [32][36] - Specific AI projects include a nurse handoff tool and AI-driven scheduling systems, aimed at improving patient care and operational efficiency [33][34][35] Future Outlook - HCA Healthcare remains optimistic about its growth trajectory, supported by strong fundamentals and ongoing investments in network expansion and technology [5][40] - The company is preparing for potential changes in the healthcare landscape, including the impact of EPTC expirations and ongoing regulatory reforms [22][23] Conclusion HCA Healthcare is positioned for continued growth through strategic investments, a focus on operational efficiency, and proactive management of market dynamics. The company is navigating challenges related to payer mix and labor costs while leveraging technology to enhance patient care and operational effectiveness.

Core Viewpoint - HCA Healthcare, a leading healthcare provider in the U.S., is donating $150,000 to veteran support organizations in recognition of Veterans Day, highlighting its commitment to supporting veterans and their families [1] Group 1: Financial Contributions - HCA Healthcare is allocating $150,000 to multiple veteran support organizations [1] - The company is specifically donating $50,000 to Operation Stand Down, which assists veterans in their transition from military service [1] Group 2: Employment Initiatives - Since 2012, HCA Healthcare has employed over 65,000 veterans, active-duty personnel, and military spouses, demonstrating its dedication to hiring those with military backgrounds [1]

分组1 - HCA Healthcare is the largest non-governmental operator of acute care hospitals in the U.S., with a market cap of $108 billion and a stock price of $471 per share. The company operates 190 hospitals and approximately 2,400 ambulatory sites across 20 states and the U.K. [16][17] - General Motors, a major player in the automotive industry, has a market cap of $64.2 billion and a stock price of $69 per share. The company held a 16.5% share of the U.S. auto market in 2024 and is focusing on electric vehicles with several major offerings [22][23][26]. - The Travelers Companies, established in 1853, operates in the property and casualty insurance sector with a market cap of $61.7 billion and a stock price of $276 per share. The company provides a variety of insurance products through three segments: Business Insurance, Personal Insurance, and Bond & Specialty Insurance [28][29][30]. 分组2 - HCA Healthcare generated revenues of $70.6 billion in 2024, with its National Group accounting for 27.8% of revenues, the American Group for 34.8%, and the Atlantic Group for 32.8% [19][20]. - General Motors has four operating segments: GM North America, GM International, Cruise, and GM Financial, with GMNA accounting for 84% of total sales in 2024 [27][35]. - The Travelers Companies' Business Insurance segment contributed 51% of net written premiums in 2024, while Personal Insurance accounted for 39% and Bond & Specialty Insurance for 10% [29][32].

Core Insights - President Donald Trump's comments regarding federal health care funding have led to a decline in shares of health insurers, suggesting a potential shift in the Affordable Care Act (ACA) funding structure [1][4]. Group 1: Market Reaction - Centene (CNC), HCA Healthcare (HCA), and Molina Healthcare (MOH) experienced significant stock declines, with Centene down over 8%, Molina nearly 7%, and HCA dropping 5% [5]. - Other health insurers, including United Health Group (UNH) and Cigna Group (CI), also saw their shares fall following Trump's remarks [5]. Group 2: Policy Implications - Trump proposed that federal health care funds should be redirected to individuals rather than insurers, which could fundamentally alter the ACA marketplace [2]. - The Committee for a Responsible Federal Budget estimated that federal subsidies to insurance companies this year amount to $138 billion, a substantial increase from $53 billion in 2020 [2][4].

Core Insights - Major health insurers' shares declined due to a Senate deal that ended a 40-day U.S. government shutdown but did not extend Affordable Care Act (ACA) subsidies, creating uncertainty for millions relying on these subsidies for health coverage [1][3] - The ongoing debate over ACA subsidies is politically charged, with a narrow window for lawmakers to act before the open enrollment period for 2026 coverage ends on January 15 [5] Group 1: Market Reaction - Health insurance stocks fell as investors assessed the implications of the political stalemate on the sector [1] - Key companies affected include Cigna Group, Centene Corp, CVS Health Inc, Elevance Health, Humana Inc, Molina Healthcare Inc, UnitedHealth Group Inc, HCA Healthcare, and Tenet Healthcare Corporation [2] Group 2: Legislative Context - A procedural vote passed 60-40, allowing for short-term funding through January 30, while delaying the ACA subsidy issue until December [3] - The temporary spending bill prevents federal agencies from terminating employees until January 30, which is seen as a victory for federal worker unions [4] Group 3: Potential Impact on Consumers - Without congressional action, approximately 24 million enrollees could face significant premium increases for their 2026 plans, with estimates suggesting monthly premiums for ACA plans could more than double if pandemic-era assistance is not extended [3]

Core Insights - Wall Street experienced a significant decline on November 6, 2025, primarily due to a sell-off in technology stocks and concerns regarding the ongoing U.S. government shutdown, which is the largest in history [1][9] Investment Strategy - Equity investors are advised to focus on dividend growth stocks rather than high price-yielding stocks, as companies with a history of raising dividends typically demonstrate strong financial health, providing a defensive hedge against economic uncertainty [2][4] - Stocks with a strong history of year-over-year dividend growth are considered to form a healthier portfolio with greater potential for capital appreciation compared to simple dividend-paying stocks [3][6] Selected Dividend Growth Stocks - Five dividend growth stocks identified as solid investment choices include: - **Vertiv (VRT)**: Expected revenue growth of 27.5% year-over-year for 2025, long-term earnings growth rate of 30%, and an annual dividend yield of 0.08% [10][11] - **Tapestry Inc. (TPR)**: Projected revenue growth of 3.20% for fiscal 2026, long-term earnings growth rate of 7.60%, and an annual dividend yield of 1.46% [11] - **HCA Healthcare (HCA)**: Anticipated revenue growth of 7.4% for 2025, long-term earnings growth rate of 12.3%, and an annual dividend yield of 0.61% [12] - **Lam Research (LRCX)**: Expected revenue growth of 12.7% for fiscal 2026, long-term earnings growth rate of 20.3%, and an annual dividend yield of 0.63% [13] - **CBOE Global Markets (CBOE)**: Projected revenue growth of 13.2% for 2025, long-term earnings growth rate of 16.3%, and an annual dividend yield of 1.15% [14] Investment Criteria - Stocks selected for their strong fundamentals include criteria such as: - 5-Year Historical Dividend Growth greater than zero, indicating a solid dividend growth history [6] - 5-Year Historical Sales Growth greater than zero, reflecting strong revenue growth [7] - 5-Year Historical EPS Growth greater than zero, indicating solid earnings growth [7] - Next 3-5 Year EPS Growth Rate greater than zero, suggesting expected earnings growth to sustain dividend payments [7] - Price/Cash Flow less than the industry average, indicating undervaluation [8] - 52-Week Price Change greater than the S&P 500, ensuring stock appreciation [8] - Top Zacks Rank of 1 (Strong Buy) or 2 (Buy), indicating potential outperformance [8][10]

Financial Performance - Revenues increased to $19.161 billion in Q3 2025, up 9.6% from $17.487 billion in Q3 2024[68] - Net income attributable to HCA Healthcare, Inc. was $1.643 billion, or $6.96 per diluted share, compared to $1.270 billion, or $4.88 per diluted share in Q3 2024[68] - Total revenues for Q3 2025 reached $19,161 million, a 9.6% increase from $17,487 million in Q3 2024[89] - Net income attributable to HCA Healthcare, Inc. for Q3 2025 was $1,643 million, a 29.4% increase from $1,270 million in Q3 2024[89] - Revenues increased to $56.087 billion in the first nine months of 2025, up 7.2% from $52.318 billion in the same period of 2024[102] - Net income attributable to HCA Healthcare, Inc. for the first nine months of 2025 was $4.906 billion, or $20.23 per diluted share, compared to $4.322 billion, or $16.37 per diluted share, in 2024[102] Admissions and Patient Volumes - Consolidated admissions increased by 2.8% and same facility admissions increased by 2.1% in Q3 2025 compared to Q3 2024[70] - Inpatient surgical volumes rose by 2.0% on a consolidated basis and 1.4% on a same facility basis in Q3 2025[70] - Same facility equivalent admissions increased by 2.4% in Q3 2025 compared to Q3 2024[89] - The percentage of admissions related to uninsured patients decreased to 6% in Q3 2025 from 7% in Q3 2024[83] - Average daily census for the third quarter of 2025 was 29,266, compared to 29,247 in the third quarter of 2024[130] - Emergency room visits for the first nine months of 2025 totaled 7,435,953, an increase from 7,290,836 in the same period of 2024[131] Revenue Sources - Consolidated revenue per equivalent admission increased by 6.1% in Q3 2025 compared to Q3 2024[89] - Medicare revenue for Q3 2025 was $2,728 million, representing 14.2% of total revenue, compared to $2,584 million (14.8%) in Q3 2024[80] - Managed Medicare revenue increased to $3,306 million (17.3%) in Q3 2025 from $2,949 million (16.9%) in Q3 2024[80] Operating Expenses and Efficiency - Salaries and benefits as a percentage of revenues decreased to 43.6% in the third quarter of 2025 from 45.0% in the same quarter of 2024[95] - Supplies as a percentage of revenues were 14.5% in the third quarter of 2025, down from 15.2% in the third quarter of 2024[96] - Other operating expenses as a percentage of revenues increased to 21.8% in the third quarter of 2025 from 21.2% in the same quarter of 2024[97] - The cost-to-charges ratio for patient care costs improved to 10.0% in Q3 2025 from 10.3% in Q3 2024[81] Cash Flow and Financing - Cash flows from operating activities increased by $901 million, from $3.515 billion in Q3 2024 to $4.416 billion in Q3 2025[71] - Cash provided by operating activities increased by $2.322 billion to $10.277 billion for the first nine months of 2025 compared to $7.955 billion in 2024, primarily due to an increase in net income of $811 million and a decline in income taxes paid of $1.259 billion[112] - Cash used in investing activities was $3.671 billion in the first nine months of 2025, slightly up from $3.587 billion in 2024, with planned capital expenditures expected to be approximately $5.0 billion in 2025[113] - Cash used in financing activities totaled $7.551 billion in the first nine months of 2025, compared to $2.419 billion in 2024, including a net increase of $1.305 billion in indebtedness and $7.509 billion for common stock repurchases[114] Share Repurchase and Dividends - The company repurchased 21.307 million shares of common stock in the first nine months of 2025[68] - HCA's Board of Directors authorized a share repurchase program for up to $10 billion, with $3.256 billion remaining available as of September 30, 2025[140] - During Q3 2025, HCA repurchased 6,514,283 shares at an average price of $383.34 per share[142] - A quarterly dividend of $0.72 per share was declared, payable on December 29, 2025[142] Debt and Interest - Total debt amounted to $44.511 billion as of September 30, 2025, with interest expense rising to $1.676 billion for the first nine months of 2025 from $1.533 billion in 2024[119] - The average effective interest rate for debt was 5.1% for the first nine months of 2025, up from 5.0% in 2024[108] - The estimated fair value of the company's debt was $43.898 billion at September 30, 2025, with a potential annualized reduction to future pretax earnings of approximately $22 million from a hypothetical 1% increase in interest rates[126] Regulatory and Market Risks - The OBBBA is expected to reduce federal health care spending, particularly in Medicaid, and may trigger a reduction in Medicare reimbursement of up to 4% in early 2026[72] - The federal government shutdown effective October 1, 2025, may cause delays in payments for services rendered[74] - HCA's management continues to monitor market risks as outlined in their financial condition discussions[135] - No material changes to risk factors were reported since the last annual report[139] Operational Controls - HCA's disclosure controls and procedures were evaluated as effective as of September 30, 2025[135] - There were no changes in internal control over financial reporting that materially affected HCA's reporting[136] - The average number of days admitted patients stayed in HCA hospitals was reported, indicating operational efficiency[134] - The percentage of patient revenues related to non-admitted patients was highlighted, reflecting service diversification[134] - HCA's emergency room patient treatment numbers and surgeries performed were tracked, indicating service demand trends[134]

Core Viewpoint - Growth investors seek stocks with above-average financial growth, but identifying such stocks can be challenging due to associated risks and volatility [1] Group 1: HCA Healthcare Overview - HCA Healthcare (HCA) is currently recommended as a growth stock by the Zacks Growth Style Score system, which evaluates a company's real growth prospects [2] - HCA has a favorable Growth Score and a top Zacks Rank, indicating strong potential for growth investors [2][9] Group 2: Earnings Growth - HCA's historical EPS growth rate is 15.2%, but the projected EPS growth for this year is 20.9%, surpassing the industry average of 17.1% [4] Group 3: Asset Utilization - HCA's asset utilization ratio (sales-to-total-assets ratio) is 1.25, indicating that the company generates $1.25 in sales for every dollar in assets, compared to the industry average of 0.71 [5] Group 4: Sales Growth - HCA's sales are expected to grow by 6.4% this year, significantly higher than the industry average of 0% [6] Group 5: Earnings Estimate Revisions - The current-year earnings estimates for HCA have been revised upward, with the Zacks Consensus Estimate increasing by 2.8% over the past month [7]

Core Insights - HCA Healthcare is currently outperforming its peers in the Medical sector with a year-to-date return of 55.9%, significantly higher than the sector average of 2.6% [4] - The Zacks Rank for HCA Healthcare is 2 (Buy), indicating a positive earnings outlook and strong analyst sentiment, with a 2.7% increase in the consensus estimate for full-year earnings over the past 90 days [3][4] - HCA Healthcare belongs to the Medical Services industry, which has seen an average gain of 7% this year, further highlighting its strong performance relative to the industry [6] Company Performance - HCA Healthcare's year-to-date return is 55.9%, showcasing its strong market performance compared to the Medical sector's average return of 2.6% [4] - The Zacks Consensus Estimate for HCA's full-year earnings has improved by 2.7% over the last 90 days, reflecting a positive shift in analyst sentiment [4] - HCA Healthcare holds a Zacks Rank of 2 (Buy), indicating favorable conditions for potential investors [3] Industry Context - HCA Healthcare is part of the Medical Services industry, which consists of 63 individual stocks and currently ranks 92 in the Zacks Industry Rank [6] - The Medical Services industry has gained an average of 7% year-to-date, positioning HCA Healthcare as a strong performer within this segment [6] - In comparison, Acadia Pharmaceuticals, another stock in the Medical sector, has a year-to-date return of 25.3% and belongs to the Medical - Biomedical and Genetics industry, which has increased by 10.3% this year [5][6]

Core Viewpoint - HCA Healthcare has shown strong stock performance, with an 11.2% increase over the past month and a 55.9% gain since the start of the year, outperforming the Zacks Medical sector and the Zacks Medical Services industry [1] Financial Performance - HCA has consistently exceeded earnings expectations, reporting EPS of $6.96 against a consensus estimate of $5.65 in its last earnings report on October 24, 2025, and beating revenue estimates by 3.55% [2] - For the current fiscal year, HCA is projected to achieve earnings of $26.56 per share on revenues of $75.56 billion, reflecting a 20.95% increase in EPS and a 7.02% increase in revenues [3] - The next fiscal year forecasts earnings of $28.76 per share on revenues of $78.22 billion, indicating year-over-year changes of 8.31% in EPS and 3.52% in revenues [3] Valuation Metrics - HCA's current trading metrics include a P/E ratio of 17.6X for the current fiscal year, slightly above the peer industry average of 17.3X, and a trailing cash flow ratio of 13X compared to the peer average of 10.3X [7] - The stock has a PEG ratio of 1.46, positioning it favorably among value stocks [7] Zacks Rank and Style Scores - HCA holds a Zacks Rank of 2 (Buy) due to favorable earnings estimate revisions, making it a suitable choice for investors seeking stocks with strong potential [8] - The company has a Value Score of A, a Growth Score of A, and a Momentum Score of C, resulting in a combined VGM Score of A [6] Industry Comparison - HCA's performance is contrasted with HealthEquity, Inc. (HQY), which has a Zacks Rank of 2 (Buy) and shows strong earnings potential, expected to post earnings of $3.86 per share on revenues of $1.31 billion for the current fiscal year [9][10] - The Medical Services industry is positioned in the top 38% of all industries, suggesting favorable conditions for both HCA and HQY [11]