HCA Healthcare (NYSE: HCA) is the third-largest company in the U.S. healthcare providers and services industry. Shares have slid recently, down over 13% from the all-time high they reached on Oct. 18. A disappointing earnings report partially caused this, leading the share price to drop 10% since the release. Before the report, analysts had raised their price targets on HCA. Since then, they have generally cut them less than the drop in the stock price.

The company said Hurricanes Helene and Milton hurt its finances, but these are temporary events. So, this begs the question: Did the market overreact, and is buying the dip on HCA a good idea? An even better question is whether this firm is set up for big-time success long-term. I’ll review what the firm does and how it is trending to answer these questions.

Analyzing the Hurricane Impact on HCA’s Financials: Was the Drop Justified?

HCA is a hospital company. At the end of 2023, it operated 186 hospitals, almost all geared toward general and acute care. The company receives significant amounts of revenue from both government healthcare plans like Medicare and Medicaid, private insurance, and directly from patients.

Last quarter, the company said it experienced around $50 million in additional costs and lost revenue due to Hurricanes Helene and Milton. In Q4, it expects to see those impacts range from $200 to $300 million. Let’s consider how much this impacts the company’s expected earnings versus what it projected previously.  At the midpoint, the company expects a combined 90-cent impact on adjusted EPS over Q3 and Q4. It expected to generate adjusted EPS of $11.34 over the last two quarters based on the guidance released in Q2. So, the 90-cent decrease due to the hurricane represents around an 8% decrease in adjusted EPS versus what was expected before.

Additionally, this impact does not include potential payments the company could receive from insurance claims due to the hurricanes. The company says it doesn’t have information yet on when and how much payment it might receive, but it does anticipate insurance recoveries. This leads me to believe there may have been a slight overreaction to the drop in share price. However, it’s not enough to justify buying the dip based on this alone.

Consistency and Long-Term Trends Paint a Bright Picture for HCA

The more important question is whether HCA makes sense as a long-term investment. After all, in the words of Kenneth Fisher, “Time in the market beats timing the market.” First off, HCA has consistently been successful over the past decade. Since 2014, the company has only experienced two quarters of negative revenue growth. So, out of 43 quarters since the beginning of 2014, the company’s revenues have risen in 41 of those, or over 95% of the time. I would venture to say that not many companies could say the same. Sure, the revenue increases aren’t eye-popping, growing at a compound annual rate of 6.6%, but consistency means a lot.

Additionally, the company’s margins look good. Last quarter’s EBITDA margin was the highest among its two largest comparable companies, Tenet Healthcare (NYSE: THC) and Universal Health Services (NYSE: UHS). The same is true for its net income margin.

Two other large tailwinds help the case for HCA Healthcare. First, the population in the United States is getting older. The median age in the country continues to increase, hitting record highs in 2024. This means that demand for healthcare services is increasing, which is a positive development for HCA. Additionally, the average life expectancy of Americans is increasing, reaching nearly 80 years in 2024. This further increases the demand for healthcare services as those most likely to require medical care will now need it for longer. The Congressional Budget Office (CBO) expects aging population trends to continue. Today, there are 2.9 people between the ages of 25 and 64 for every one person above the age of 65. The CBO expects that ratio to decline to 2.2 by 2054. This will further exacerbate the need for healthcare services, benefiting HCA.

HCA Can Keep Winning in the Long Term

Overall, although HCA is not a hot stock pick, it is positioned strongly in the long term. Its ability to generate consistent results, leading position among its peers, and demographic trends give me confidence that the company will continue its success for years to come.