Profit Therapy: 3 Medical Stocks Ready to Deliver Q4 Beat

Core Insights - The fourth-quarter 2025 earnings season for the Medical sector is showing a broad-based recovery in operating trends, driven by factors such as stronger outpatient volumes, higher admissions, improved revenues per equivalent admission, rising utilization, premium rate hikes, and accelerating adoption of tech-enabled services [1][4][6] - However, escalating medical costs, driven by higher utilization intensity and increased salaries and benefits, are tempering margin expansion [1][5] Medical Sector Overview - The medical sector includes a wide range of services such as hospitals, physician services, nursing care facilities, health insurers, pharmaceutical firms, medical device makers, and outpatient and home healthcare providers [4] - The sector is benefiting from demographic trends like an aging population and increasing healthcare utilization, leading to consistent revenue growth across most verticals [4] Profitability Challenges - Near-term profitability is constrained due to elevated spending on digital platforms, automation, and clinical innovation, which have increased operating expenses [5] - Wage inflation and rising employee benefit costs are intensifying margin pressure, while softer government plan enrollment is affecting premium growth for insurers [5] Growth Drivers - Patient volumes have strengthened, with higher ambulatory visits, increased elective procedures, and rising specialty care utilization contributing to improved revenue per admission [7] - Technology-led transformation, including the adoption of artificial intelligence and automation, is enhancing clinical productivity and reducing inefficiencies [8] Stock Recommendations - Three stocks identified as well-positioned to beat earnings estimates this season are Tenet Healthcare Corporation (THC), Universal Health Services, Inc. (UHS), and Option Care Health, Inc. (OPCH) [2][10] - Tenet Healthcare is experiencing a favorable payer mix and rising demand for ambulatory care, with an Earnings ESP of +2.72% and a Zacks Rank 3 [12] - Universal Health Services is expected to benefit from strong performance in Acute Care and Behavioral Health, with an Earnings ESP of +8.33% and a Zacks Rank 2 [15] - Option Care Health is seeing growth from commercial and government payers, with an Earnings ESP of +1.54% and a Zacks Rank 3 [17] Earnings Estimates - The consensus estimate for fourth-quarter revenues in the medical sector is $5.45 billion, indicating a 7.5% year-over-year growth, while the EPS estimate is $4.08, reflecting an 18.6% increase from the previous year [13] - Universal Health's fourth-quarter earnings are expected to be $5.91 per share, indicating a 20.1% year-over-year growth, with revenues projected at $4.48 billion, a 9% increase [15]