NEW YORK (TheStreet) -- HCA Holdings(HCA) - Get Report shares closed trading up 5.85% to $74.93 on Wednesday as healthcare stocks rallied following a U.S. Supreme Court hearing on the Affordable Care Act today.
The Court heard arguments from opponents of the law who say that the subsidies central to the success of the program should not be dispersed in the 34 states that have failed to set up their own exchanges, often times because of their opposition to the law.
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The increase came after the Court's swing vote, Justice Anthony Kennedy, said that there is a "serious constitutional problem" if the subsidies provided under the affordable care act were ruled unlawful, according to Bloomberg.
Hospital stocks have benefited from the implementation of the law which provides subsidies for Americans looking for health insurance who cannot afford it and penalizes citizens over a certain age who do not have health insurance.
The Affordable Care Act will distribute $22 billion in subsidies this year, according to the Congressional Budget Office.
The law has spurred 11.4 million Americans to sign up for coverage in 2015, giving hospitals an expanded base of customers who now can afford care through their insurance.
TheStreet Ratings team rates HCA HOLDINGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate HCA HOLDINGS INC (HCA) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, revenue growth, good cash flow from operations and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 29.34% and other important driving factors, this stock has surged by 43.16% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HCA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- HCA HOLDINGS INC has improved earnings per share by 29.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HCA HOLDINGS INC increased its bottom line by earning $4.18 versus $3.36 in the prior year. This year, the market expects an improvement in earnings ($4.92 versus $4.18).
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.4%. Since the same quarter one year prior, revenues slightly increased by 9.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $1,627.00 million or 32.70% when compared to the same quarter last year. Despite an increase in cash flow of 32.70%, HCA HOLDINGS INC is still growing at a significantly lower rate than the industry average of 105.25%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income increased by 24.3% when compared to the same quarter one year prior, going from $424.00 million to $527.00 million.
- You can view the full analysis from the report here: HCA Ratings Report