Thriving in Healthcare: 5 Hospital Stocks to Keep on Your Radar

Industry Overview - The Zacks Medical-Hospital industry consists of for-profit hospital companies providing various healthcare services, including acute care, rehabilitation, and psychiatric care [3] - Revenue generation is influenced by inpatient occupancy levels, medical services ordered by physicians, and outpatient procedures [3] Key Trends Shaping the Hospital Industry - Rising patient volumes are driven by the resumption of elective procedures post-pandemic, with the 65+ age group projected to grow from 17.3% in 2022 to 22.8% by 2050, increasing healthcare demand [4] - Hospitals are managing cost pressures by focusing on labor productivity and efficiency improvements, with higher revenue per admission helping sustain margins [5] - The digital shift in healthcare is being accelerated by the adoption of AI, automation, and telehealth services, enhancing patient care and operational efficiency [6] M&A Activity - Mergers and acquisitions are expected to surge as hospitals seek to expand capacity and improve efficiency, with a fragmented industry ripe for consolidation [7] Financial Performance - The Zacks Medical-Hospital industry currently holds a Zacks Industry Rank of 90, placing it in the top 36% of nearly 250 industries, indicating positive near-term prospects [8] - Earnings estimates for the industry have increased by 13.4% and 11.4% for 2024 and 2025, respectively, reflecting optimism about earnings growth potential [10] Stock Market Performance - Over the past year, the Zacks Medical-Hospital industry has gained 5.8%, outperforming the Zacks Medical sector's decline of 1.6%, but lagging behind the S&P 500's return of 23.8% [12] Current Valuation - The industry trades at a trailing 12-month EV/EBITDA ratio of 7.84X, significantly lower than the S&P 500's 18.93X and the sector's 12.03X [14] Company Highlights - HCA Healthcare: Positioned for growth with increasing patient volumes and strategic acquisitions, with a projected EPS growth of 13.3% year-over-year for 2025 [16][17] - Tenet Healthcare Corporation: Benefits from strong revenue growth driven by rising patient volumes, with projected revenues of $20.8 billion and $21.3 billion for 2024 and 2025 [19][20] - Universal Health Services: Growth driven by rising patient days and an expanding care network, with projected revenues of $15.7 billion and $16.6 billion for 2024 and 2025 [22][23] - Acadia Healthcare: Focused on expanding behavioral healthcare services, with projected revenues of $3.2 billion and $3.4 billion for 2024 and 2025 [25][26] - Community Health Systems: Actively acquiring hospitals and divesting non-core assets to enhance profitability, with projected revenues of $12.5 billion and $12.8 billion for 2024 and 2025 [28][29]