HCA Healthcare, Inc. (HCA) Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 delivered broad-based volume-driven strength: revenues $17.492B, diluted EPS $5.53, and adjusted EBITDA $3.550B; adjusted EBITDA margin expanded to 20.3%, up ~100 bps y/y, underpinned by lower contract labor and improved mix .
• Management raised FY2024 guidance across revenue, net income, EBITDA, and EPS; CapEx held at $5.1–$5.3B; share repurchases guided to ~$6B for 2024, a notable capital return catalyst .
• Operational highlights: same-facility admissions +5.8%, ER visits +5.5%, inpatient surgeries +2.6%, revenue per equivalent admission +4.4%; outpatient surgeries down ~2% driven by Medicaid/uninsured, but profitability for outpatient remained solid per management .
• Medicaid supplemental payments flipped from anticipated headwind to a ~$100–$200M tailwind for 2024 (mostly 1H), contributing ~$125M y/y in Q2, while exchange volumes surged (+46% y/y), now ~7% of admissions and ~9% of revenue .
• Consensus estimates from S&P Global were unavailable due to request limits; thus we cannot quantify beats/misses vs Street for Q2 (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

• Strong demand and execution produced “positive” results across markets and service lines; same-facility revenue grew ~10% aided by payer mix improvement and slightly higher acuity; EPS as adjusted rose 28% y/y to $5.50 .
• Cost discipline: adjusted EBITDA +16% y/y; labor cost improved 200 bps y/y; contract labor down 25.7% y/y to 4.8% of SWB; supply costs improved 50 bps y/y as a percent of revenue .
• Guidance raised broadly; capital allocation balanced: ~$1.37B buybacks in Q2 and ~$170M dividends; FY2024 repurchases targeted at ~$6B (subject to market) .

Quoted highlights:

• CEO: “The company’s results for the second quarter were positive and reflected strong demand for our services.”
• CFO: “Adjusted EBITDA was $3.55 billion… a 16% increase over the prior year…” and “contract labor… declined 25.7%… represented 4.8% of total labor costs.”
• CFO: “We are updating estimated guidance for 2024… revenues $69.75–$71.75B… EPS $21.60–$22.80.”

What Went Wrong

• Outpatient surgeries down ~2% y/y, primarily in Medicaid and uninsured; management notes continued strength in revenue and profitability, but volumes softer in these payer classes .
• Cash flow from operations declined vs Q2’23 (to $1.971B from $2.475B) driven by income tax payments and timing of Medicaid program accruals/receipts .
• Professional fee expense growth remained elevated y/y (moderated to ~13% vs 20% in Q1), still a pressure point to monitor .

Financial Results

KPIs (same-facility unless noted):

Additional mix/volume disclosures (Q2 2024):

• Commercial equivalent admissions +~12.5% y/y (incl. exchanges); managed care ex-exchanges +~5%; exchange equivalent admissions +46% y/y; exchange share ~7% of admissions and ~9% of revenue .
• Medicaid equivalent admissions down ~10% y/y due to redeterminations .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic execution and demand: “Positive across the board… strong demand… continued to execute our strategic plan” – CEO Sam Hazen .
• Mix and acuity: Commercial volumes 36.2% of equivalent admissions; acuity slightly higher; same-facility revenue up ~10% .
• Cost discipline: “Labor cost has improved 200 basis points… contract labor… declined 25.7%… 4.8% of total labor costs… supply costs… improved 50 basis points” – CFO Mike Marks .
• Capital allocation and leverage: Cash flow just under $2B in Q2; CapEx $1.28B; buybacks $1.37B; dividends ~$170M; leverage near low end of range .
• Guidance/repurchases: Updated FY2024 guidance; share repurchases estimated around $6B in 2024 (subject to market) .

Q&A Highlights

• Medicaid supplemental payments: ~$125M y/y earnings uplift in Q2; FY2024 tailwind ~$100–$200M (mostly in 1H); Tennessee program under CMS review with no 2024 impact; margins for Medicaid still below cost even with supplemental payments; sustainability broadly supported across red/blue states .
• Exchange dynamics: Managed care equivalent admissions +~12.5% y/y; exchanges +46% y/y; exchanges ~7% admissions and ~9% revenue; margins below commercial but above Medicare .
• Labor trends: Contract labor -25.7% y/y to 4.8% of SWB; wage inflation ~2.5–3% in 2024; LOS down ~2% aiding throughput/productivity .
• ER operations: Commercial ER volumes +~18%; time-to-see reduced from ~11 to ~9 minutes; discharged LOS down 15–20%; improved bed holds .
• Outpatient surgeries: Volume declines concentrated in Medicaid/uninsured; ASC same-store revenue growth ~8%; management expects potential seasonal effects as redetermination patients migrate to exchanges .

Estimates Context

• S&P Global consensus for Q2 2024 EPS and revenue was unavailable due to request limits; we cannot provide beat/miss quantification relative to Street for this quarter. If you want, we can refresh once access is restored and update the tables accordingly.
• Operationally, the company raised full-year guidance and reported stronger y/y volumes and margins, which typically support upward estimate revisions on FY metrics, but we will avoid speculating without the S&P dataset .

Key Takeaways for Investors

• Volume strength is broad-based with favorable mix/acuity; same-facility revenue per equivalent admission +4.4% y/y, reinforcing pricing power and case-mix tailwinds .
• Cost structure improving: contract labor down sharply; supply and SWB ratios better y/y; expect mid-4% contract labor share in 2H per management .
• Medicaid supplemental programs are a 2024 tailwind (~$100–$200M), but inherently variable; monitor timing and state-level developments (e.g., Tennessee) .
• Exchanges are a growing demand source (+46% y/y), now ~7% of admissions/~9% of revenue; watch 2025 subsidy policy risk into the election cycle .
• Outpatient surgery volumes soft in Medicaid/uninsured, but segment profitability and revenue remain solid; potential seasonal normalization in 2H as redetermination effects settle .
• Capital return remains a catalyst: guidance raised; ~$6B repurchases targeted in 2024; dividend maintained at $0.66/share .
• Trading implications: The guidance raise and margin trajectory are positive near-term drivers; risks include estimate uncertainty (pending consensus data), exchange subsidy policy for 2025, and variability in supplemental payments .