Since entering the race on April 25, Biden has rapidly solidified his status as the front-runner for the 2020 Democratic Presidential nomination, with a lead of 16.8 points (vs. 18.4p 1-week ago / 17p 2-weeks ago) according to the RCP’s national polls – see slide 3. There was no noticeable change in the polls over the past two weeks with Sanders remaining a distant second and Warren / Harris sitting in third / fourth. While the polls have been relatively stable, look for potential volatility into the first Democratic debates scheduled for June 26-27 and July 30-31, respectively – we discuss the change in the debate rules this year on page 2.
Search Coverage List, Models & Reports
Search Results1-10 out of 272
We are updating estimates and PTs for HCA, THC, and UHS to reflect our revised estimates / EBITDA bridges post Q1 results and a modest discount to EV/EBITDA – NCI target multiples reflecting current political uncertainty. See summary of changes and our commentary by company on pages 2-9. We maintain our Outperform ratings on HCA, UHS and Peer Perform for THC.
1Q19 adj. EPS from continuing ops of $0.91 compared to WR/Cons of 0.97/$0.93 with adj. op income of $382M slightly above WR / Cons. est. of $375M / $378M. Importantly, results in the qtr benefitted by calcimimetics of $38M vs. ~$5M in Q1’18. Additionally OI in dialysis faced headwinds from advocacy costs / 1 less day as well (see page 2 for bridge). EPS downside was due to higher interest expense / NCI. DVA reiterated FY19 Kidney Care OI guidance of $1.54B-$1.64B that was introduced earlier this year. Recall CEO Kent Thierry is expected to step down on June 1st and the co expects to hold a Capital Markets day later this year in Aug / Sept. Finally the co. reiterated the DMG deal is on track.
HCA announced 1Q19 adj EBITDA of $2.54B (+20.0% y/y). Excluding a $86M benefit from an out-of-network arbitration w/ a payer, adj EBITDA of $2.46B is still well ahead of WR / Consensus estimates of ~$2.27B/$2.28B primarily driven by better cost management vs. our estimates. Cash revenues ex. arbitration were $12.4B (+8.8% y/y), better than Consensus $12.3B but below WR est. $12.6B. HCA raised 2019 EBITDA guidance by less than the beat at $100M to $9.45B-$9.85B – look for more color here. We expect the stock to react well this morning on strong results.
THC reported 1Q19 adj EBITDA of $613M, slightly above WR/Consensus of $610M/$608M and above the midpoint of THC’s Q1 outlook of $575M-$625M with better revenue of $4.545B vs WR/Consensus of $4.54B/$4.51B. The slight beat was driven by better Conifer results vs. our model, with Hospitals slightly below (note malpractice expense came in higher than guide) and Ambulatory Care in-line. THC did not have any major updates to FY19 guidance – the co updated GAAP EPS and net income guidance for the year but left adjusted EBITDA, adjusted EPS, and by-segment EBITDA unchanged. 2Q19 EBITDA guidance of $625M-$675M generally brackets WR/Consensus of $662/$664M. We expect an update on core trends and Conifer transaction on tomorrow’s call.
DaVita announced this morning that its board of directors have unanimously elected Javier Rodriguez to succeed Kent Thiry on June 1st, 2019. Kent Thiry (63 years old) will transition from his current role as chairman of BOD and CEO to executive chairman of DaVita’s board of directors. The co noted that today’s announcement was part of a multi-year succession process that involved both internal / exernal candidates. Thiry has been CEO of Davita as well as chairman / co-chairman of board of directors since 1999. We do not see the transition as a surprise as Mr. Rodriguez has been running DVA dialysis ops day-to-day for many years and with the sale of DMG ($4.34B of proceeds) we see this as a solid time for transition with the ability for a new CEO to deploy capital and set strategic course for company going into potential opportunities such as Med Adv optionality in 2021 (see slides highlighting DVA opportunity set).
UHS reported 1Q19 adjusted EBITDA-NCI of $457M, below WR/Cons of $478M, with adj. EPS at $2.45 vs. Wolfe/Cons $2.56/$2.62. The miss in the quarter was driven by weaker than expected acute results, with behavioral EBITDA of $288M ~in-line with our est. Acute saw solid SS revenue growth of 4.7%, but total acute EBITDA fell 3.5% y/y to $267M driven by weak pricing with SS revenue per adj. admit of -0.4% driven by lower acuity (see more below). Behavioral SS rev growth of 3.0% reflected continued length of stay pressure with modest pricing and 2.9% SS Adj Admission growth. No changes to FY19 guidance were made in the press release, which implied ~6% EBITDA growth at the midpoint when it was released (note the co provided by segment commentary on the 4Q18 call).
On Tuesday (04/24/19) CMS released the Medicare FY2020 Hospital Inpatient Prospective Payment Systems (IPPS) proposed rule. Before accounting for Medicare Disproportionate Share (DSH) payments CMS estimates that industry rates would increase by 3.5%, with proprietary (for-profit) rates increasing by 3.6%. Rates for Rural hospitals (+3.6%) are slightly better than Urban hospitals (+3.5%). Key drivers of the +3.5% include a market basket update of 3.2%, productivity cut worth -0.5%, documentation and coding benefit of +0.5% and other small adjustments adding 30bps. CMS estimates that changes to uncompensated care / new technology add-on / low-volume / capital payments will add an additional 20bps to rates. We would expect all-in reimbursement for the industry of +370bps and +380bps for the for-profits based on the proposed rule. This represents another year of solid rate following FY19’s +340bps for the for-profits and we would expect the stocks to react favorably to the release. Please see the impact table from the proposed rule in Exhibit 1 on Page 2.
We confirmed with UNH IR that comments made on the UNH 1Q19 call stating that DVA / UNH have a “clear path” to deal approval meant that the companies have basically reached an agreement with the government on the structure of the deal, although there are still details that need to be worked out and there was no update on timing. We note that this was new language from UNH, and from a DVA perspective we expect deal completion to be a positive catalyst for the stock.
We are updating estimates and PTs for DVA, HCA, THC, and UHS to reflect 1) our revised estimates / 2019 earnings bridges post Q4 results and 10K reviews as laid out in this note and 2) the current S&P 500 market multiple of ~11.25x NTM EV/EBITDA (up from previous 10.25x coming into 2019). We are adjusting our 2020 estimates at all 4 facilities post generally solid Q4 results and in-line to better 2019 guidance releases. See summary of changes and our commentary by company on pages 2-12. We maintain our Outperform ratings on DVA, HCA, UHS and Peer Perform for THC.
- 1 of 28
- next →