The outlook for the Zacks Medical-Hospital industry remains strong, backed by robust demand, improving financial performance, operational and staffing stability, and growth in patient stays. Expansion is further fueled by rising patient volumes and technological advancements. Although challenges like increasing salaries, benefits, supply costs and regulatory risks persist, they are expected to be offset by higher revenue per admission.
Mergers and acquisitions (M&A) continue to be a key growth catalyst, enabling hospitals to expand capacity and capture greater market share. Companies like HCA Healthcare, Inc. HCA, Tenet Healthcare Corporation THC, Universal Health Services, Inc. UHS and Community Health Systems, Inc. CYH are poised to benefit from these industry trends.
Industry Overview
The Zacks Medical-Hospital industry comprises for-profit hospital companies that provide healthcare through different types of hospitals, such as acute care, rehabilitation and psychiatric. These hospital entities are engaged in internal medicine, general surgery, cardiology, oncology, neurosurgery, orthopedics and obstetrics, telehealth services, mental health care and diagnostic and emergency services. Revenues of these companies depend on inpatient occupancy levels, medical and ancillary services ordered by physicians and provided to patients, and the volume of outpatient procedures. These hospital companies receive payments for patient services from the government under the Medicare program, Medicaid, or similar programs, managed care plans (including plans offered through the American Health Benefit Exchanges), private insurers and directly from patients.
Key Trends Shaping the Hospital Industry
Growing Patient Volumes: Elective procedures resuming post-pandemic are driving higher patient volumes and hospital admissions. Per the revised U.S. Census Bureau data, the 65+ age group is projected to grow from 17.3% in 2022 to 22.8% by 2050, further boosting healthcare demand. While rising costs remain a concern, programs like the Affordable Care Act are expected to support continued growth. Outpatient care is among the fastest-growing segments, signaling a shift in healthcare delivery. Health spending is projected to reach $5.3 trillion in 2025, per Peterson-KFF Health System Tracker.
Managing Cost Pressures: Rising patient volumes and higher supply, labor and benefit costs are driving up hospital expenses. To counter this, hospitals are improving labor productivity, adopting cost-saving technologies and enhancing operational efficiency. Better staffing strategies are reducing dependence on costly contract labor, while higher revenue per admission is helping sustain margins. Stabilizing patient volumes are enabling more effective planning, and renegotiated supplier contracts are expected to strengthen cost control. Additionally, President Trump’s healthcare pricing transparency initiative could further support hospitals’ cost management efforts.
Embracing the Digital Shift: The ransomware attack on UnitedHealth Group’s Change Healthcare unit last year highlighted the critical need for stronger cybersecurity across the healthcare sector. In response, hospitals are accelerating the adoption of AI, automation and real-time analytics to enhance patient care, streamline operations and control costs. These technologies are improving efficiency, driving better patient outcomes, and offering a competitive advantage in a rapidly evolving industry. At the same time, telehealth and telemedicine, fast-tracked by the pandemic, have firmly established themselves as essential components of modern healthcare delivery.
Rising M&A Activity: After a pandemic-induced slowdown, M&A in the hospital and healthcare sector has made a strong comeback. With the industry still highly fragmented, deal activity is expected to continue, driven by goals of expanding capacity, boosting efficiency and managing financial pressures. As the tariff wars settle and economic volatility eases, greater confidence will fuel consolidation efforts. Business combinations, tech collaborations and innovative models are poised to drive profitability and sharpen the competitive edge for hospital operators.
Zacks Industry Rank Shows Promise
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, signals bright near-term prospects. The Zacks Medical-Hospital industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #27, which places it in the top 11% of nearly 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. In fact, earnings estimates for the industry for 2025 and 2026 have jumped 10.8% and 8.8%, respectively, in the past year.
Before we present the stocks that you may want to watch, let’s take a look at the industry’s recent stock market performance and valuation.
Industry Outperforms S&P 500 & Sector
The Zacks Medical-Hospital industry has outpaced the Zacks Medical sector and the S&P 500 composite over the year-to-date period. The industry has gained 3% against the sector’s 3.3% decline and the S&P 500’s 6.4% fall.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA (Enterprise Value/ Earnings Before Interest Tax Depreciation and Amortization) ratio, which is commonly used for valuing hospital stocks, the industry trades at 7.48X compared with the S&P 500’s 16.31X and the sector’s 10.48X.
Over the past five years, the industry has traded as high as 9.55X and as low as 6.16X, with a median of 7.99X, as the charts below show.
EV/EBITDA Ratio (Past 5 Years)
4 Hospital Stocks Worth Your Attention
Universal Health Services: The company runs acute care hospitals, outpatient centers and behavioral health facilities, specializing in areas such as autism, eating disorders, substance use disorders and military-related conditions through its Patriot Support Program. Growth is being fueled by rising patient days and an expanding care network. The addition of licensed beds at acute care hospitals and strategic joint ventures in behavioral health is also expected to further drive its growth.
The Zacks Consensus Estimate for Universal Health’s 2025 and 2026 bottom line is pegged at $18.94 and $20.94 per share, respectively, up 14% and 10.6% year over year, respectively. UHS beat earnings estimates in three of the past four quarters and missed once, the average surprise being 15.5%. The consensus mark for 2025 and 2026 revenues indicates 8.1% and 5.3% year-over-year increases. Shares of the company have gained 9.3% over the past week. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: UHS
Tenet Healthcare Corporation: The company operates a broad network of general hospitals and healthcare facilities, supported by strong revenue growth across its Ambulatory Care and Hospital segments. Its Ambulatory Care division, led by the strong performance of its USPI unit, remains a key growth driver. Strategic tuck-in acquisitions are further strengthening Tenet Healthcare’s operations, solidifying its position as a leading player in the healthcare sector.
The Zacks Consensus Estimate for Tenet Healthcare’s 2025 and 2026 bottom line indicates 2.3% and 10.5% year-over-year growth. It beat earnings estimates in all the past four quarters, the average surprise being 46.9%. The consensus mark for 2025 and 2026 revenues is pegged at $20.9 billion and $21.9 billion, signaling an increase from $20.7 billion in 2024. Shares of the company have gained 10.6% over the past week. It currently has a Zacks Rank #2 (Buy).
Price & Consensus: THC
HCA Healthcare: The company operates general and acute care hospitals along with related facilities and is well-positioned for growth amid rising patient volumes and admissions. Its expansion into telemedicine is expected to diversify revenue streams and strengthen its service portfolio. Increased inpatient surgeries and higher same-facility emergency room visits are further supporting its performance. HCA Healthcareis also scaling operations through strategic acquisitions and remains committed to enhancing shareholder value through consistent dividend hikes and share repurchase programs.
The Zacks Consensus Estimate for one of the biggest for-profit publicly traded hospitals’ 2025 EPS indicates 13.6% year-over-year growth. HCA Healthcare beat earnings estimates in each of the past four quarters, the average surprise being 7.1%. The consensus mark for 2025 revenues signals a 5.8% increase from a year ago. Shares of the company have grown 3.2% over the past week. It currently has a Zacks Rank #3 (Hold).
Price & Consensus: HCA
Community Health Systems: It operates a nationwide network of general acute care hospitals and outpatient facilities, benefiting from higher occupancy rates that drive strong performance. With a strategic focus on telehealth, CYH is positioning itself for long-term growth. The company is expanding its portfolio through hospital acquisitions, enhancing specialty medical services, and improving cost efficiency. Simultaneously, it is divesting non-core assets to boost profitability, optimize same-store performance, and strengthen cash flow. While these divestments may affect short-term results, they are expected to create a leaner, more profitable operation in the future.
The Zacks Consensus Estimate for CYH’s 2025 and 2026 bottom lines indicates 60.9% and 163.2% year-over-year improvements, respectively. It beat earnings estimates once in the past four quarters and missed on the other occasions. The consensus mark for 2025 and 2026 revenues is pegged at $12.4 billion and $12.9 billion, respectively. Shares of the company have gained 11.7% in the past week. It has a Zacks Rank #3 (Hold) at present.
Price & Consensus: CYH
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