HCA - U.S. hospital operator stocks rebound; Deutsche Bank slashes PT on HCA Tenet

Shares of U.S. hospital operators rebounded from losses in the previous session to gain on Thursday amidst stronger broader markets.

Tenet Healthcare ( NYSE: THC ) +8.5% to $54.91, HCA Healthcare ( NYSE: HCA ) +4.1% to $172.83, Universal Health Services ( NYSE: UHS ) +2.1% to $104.36 and Community Health Systems ( NYSE: CYH ) +0.3% to $3.91.

The four companies had fallen between 2.5% to 6.7% on Wednesday.

Deutsche Bank research analyst Pito Chickering on Thursday gave HCA a buy rating, but slashed its price target to $200 from $306 in a note titled "Partly cloudy also means partly sunny; bear case seems overdone". The new PT represents a 20.5% upside to HCA's last closing price of $165.99.

Chickering acknowledged that hospital operators have had a very disappointing year so far, but believes that for HCA, H2 revenues won't nearly be as bad as investors fear. With contract labor beginning to unwind, Chickering is more optimistic about the second half of the year than the bear case.

Hospital operators have struggled in the first half of the year due to a decline in COVID-19 cases which have not been offset by a proportional increase in non-COVID patients and procedures.

Universal Health Services last week slashed its annual guidance, citing adverse operating conditions. The forecast cut sparked an industry-wide selloff .

Deutsche Bank's Chickering reiterated a buy rating on THC, while slashing the price target to $90 from $110 in a note titled "Don't throw the baby out with the bathwater, reiterate Buy". The new PT represents a 77.8% upside to THC's last closing price of $50.62.

Chickering said THC remained Deutsche Bank's top pick for hospitals heading into H2 and 2023.

"The question we continually get is "can THC work if HCA doesn't" and we acknowledge that THC could struggle, but as investors understand why THC is fundamentally operating differently than HCA, we believe investors can have higher conviction in THC 2023 EBITDA growth due to better cost controls on the hospital...", said Chickering.

Deutsche Bank's buy rating on HCA matches the Wall Street average rating and the SA Authors rating of buy, while contrasting with the Quant rating of hold.

The bank's buy rating on THC compares to a Wall Street average rating of strong buy and a SA Authors rating of buy. The Quant rating is hold.

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