Three Health Care Stocks That Caught the Flu (and Sank) on Friday: THC, HMA, HCA

On Friday, health care stocks Tenet Healthcare Corporation (NYSE: THC), Health Management Associates (NYSE: HMA) and HCA Holdings (NYSE: HCA) all caught the flu with THC sinking 10.68%, HMA falling 7.89% and HCA falling 7.19% – and Obamacare along with health care rationing is not even a foregone certainty yet. Why did they fall? One likely explanation could be some revisions in analysts ratings – along with the considerable uncertainty health care stocks face in the future. Otherwise, it has also been reported that data breaches at US health-care providers are rising as hospitals adopt electronic medical records and mobile technology but do not spend enough on security to ensure patient privacy (look for a few lawsuits or actions from regulators to change that) while the “super committee’s” failure means a 2% across-the-board cut to Medicare – which will hit hospitals particularly hard in the form of lower reimbursements. Hence, are health care stocks Tenet Healthcare (THC), Health Management Associates (HMA) and HCA Holdings (HCA) presenting investors with buying opportunities now? Here is a closer look at all three to help you decide:

Tenet Healthcare Corporation (NYSE: THC)

Tenet Healthcare provides health care services through the operation of acute care hospitals and related health care facilities. On Friday, Tenet Healthcare fell 10.68% to $4.18 (THC has a 52 week trading range of $3.46 to $7.70 a share) for a market cap $1.82 billion. BMO Capital Markets has just given Tenet Healthcare a Market Perform rating and a $5 price target – adding that its current valuation leaves little room for appreciation. Tenet Healthcare has also crossed below the 50-day moving average and will likely head lower as long as it remains below this line. Investors should also note that Tenet Healthcare has reported declining net income of $15,000k (most recent quarter), $63,000k, $82,000k and $82,000k for the past four quarters but rising net income of $1,152,000k (2010), $197,000k (2009) and $25,000k (2008) for the past couple of years.

Health Management Associates (NYSE: HMA)

Health Management Associates operates general acute care hospitals in non-urban communities concentrated in Southern states. On Friday, Health Management Associates fell 7.89% to $7.47 (HMA has a 52 week trading range of $6.06 to $11.74 a share) for a market cap of $1.90 billion. It should be noted that Health Management Associates was rated a Market Perform at BMO Capital Markets with a $9 price target and while it was noted that innovation will improve its outlook, “many obstacles remain.” Health Management Associates has reported mixed net income of $43,728k (most recent quarter), $48,611k, $55,524k and $28,179k for the past four quarters and mixed net income of $150,069k (2010), $138,182k (2009) and $167,225k (2008) over the past couple of years. However, I would think that hospitals in non-urban communities would experience fewer admissions due to violence but then again, Health Management Associates operates in southern states where there tends to be more poverty and less healthier eating habits.

HCA Holdings (NYSE: HCA)

HCA Holdings is a non-governmental hospital operator in the United States and an integrated provider of health care and related services. On Friday, HCA Holdings fell 7.19% to $22.45 (HCA has a 52 week trading range of $17.03 to $35.37 a share) for a market cap of $9.80 billion. HCA Holdings was rated a Market Perform by BMO Capital Markets with a $27 price target and while it was called a strong company, it was also noted that leverage limits upside. Investors should also note that HCA Holdings has seen declining quarterly revenues of $61,000k (most recent quarter), $229,000k, $240,000k and $283,000k over the past four quarters and somewhat mixed net income of $1,207,000k (2010), $1,054,000k (2009) and $1,424,000k (2008) over the past few years.

The Bottom Line. Irrespective of their individual strengths and weaknesses, healthcare stocks Tenet Healthcare (THC), Health Management Associates (HMA) and HCA Holdings (HCA) might just face too many headwinds for most investors.