Nations worldwide are experiencing a surge in hospital admissions owing to a resurgence of COVID-19 infections and post-covid syndromes, and an increase in the diagnosis of chronic diseases. This has…
buoyed investors’ interest in hospital stocks, as evidenced by the Health Care Select Sector SPDR Fund’s (XLV) 3.8% gains over the past month and 18% year-to-date returns.
In addition, the Biden Administration recently revised its Build Back Better social spending bill, which includes several healthcare provisions. The passage of this bill could potentially open new doors for the hospital industry. Moreover, according to a Grand View Research Report, the global hospital services market is expected to grow at an 8.1% CAGR through 2026.
Against this backdrop, we think it could be wise to bet on fundamentally strong hospital stocks Encompass Health Corporation (EHC – Get Rating), Select Medical Holdings Corporation (SEM – Get Rating), and Hanger, Inc. (HNGR – Get Rating), which are expected to continue gaining in price in the coming months.
Click here to checkout our Healthcare Sector Report for 2021
Encompass Health Corporation (EHC – Get Rating)
A leading provider of inpatient rehabilitation and home-based care, Birmingham, Ala.-based EHC is also one of the largest Medicare-certified skilled home health services providers. The company operates roughly 140 hospitals, 250 home health locations, and 93 hospice locations in 42 states and Puerto Rico.
On October 21, EHC and Baptist Health South Florida agreed to a joint venture to include the Baptist Health home health agency in Miami, Florida. Barb Jacobsmeyer, CEO of Encompass Health’s home health and hospice business, said, “We look forward to continuing to help Baptist Health South Florida further enhance its mission of improving the health and well-being of individuals and to promote the sanctity and preservation of life, in the communities they serve.”
For the third quarter, ended September 30, 2021, EHC’s net operating revenues increased 9.4% year-over-year to $1.28 billion. The company’s net and comprehensible income increased 28.7% year-over-year to $100 million. Its adjusted EPS came in at $1.03, up 32.1% year-over-year. Also, its adjusted EBITDA for the quarter increased 6.7% year-over-year to $245.60 million.
EHC’s revenue and EPS are expected to increase 11.2% and 51.9%, respectively, year-over-year to $5.17 billion and $4.39 for its fiscal year 2021. It has surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 0.4% in price over the past year to close Friday’s trading session at $63.56.
EHC’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Value, and Stability.
We have also graded EGC for Momentum, Sentiment, and Quality here. EHC is ranked #4 of 12 stocks in the B-rated Medical – Hospitals industry.
Select Medical Holdings Corporation (SEM – Get Rating)
SEM in Mechanicsburg, Pa., is one of the largest post-acute care providers, operating 99 critical illness recovery hospitals in 28 states. The company’s segments include specialty hospitals; outpatient rehabilitation; Concentra; and Others.
On June 21, SEM announced that it had entered a series of transactions whereby it will be operating seven new critical illness recovery hospitals, licensed as long-term acute care, and eight new outpatient clinics through acquisitions and new joint venture partnerships. These moves are expected to…
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