HCA Healthcare (HCA, Financial), the largest operator of for-profit hospitals and related health care services in the U.S., was a top contributor for the quarter. HCA Healthcare reported third-quarter earnings that generally came in slightly above consensus estimates after removing various one-time items, and the company reiterated full-year guidance for 2022. The core business drivers are healthy, and management is executing well, in our view. Next year, the company will face around $500 million in headwinds to adjusted earnings from various non-recurring items, and volume growth looks like it will be around 1-2%, compared to the typical 2-3%, due to having to grow over this year’s higher Covid-19 volumes. We believe underlying volume trends are solid and that both acuity and payer mix are stable. Further, HCA is getting traction with payers on passing through price increases for inflation. Contract labor costs appear to be beginning to ease already, and we believe capacity constraints are likely to improve over the next couple of years. We believe these dynamics, coupled with the flow-through of higher pricing to reflect inflation, should provide tailwinds to adjusted earnings growth.
From David Herro (Trades, Portfolio) and Bill Nygren (Trades, Portfolio)'s Oakmark Global Select Fund fourth-quarter 2022 commentary.
