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Why Is Tenet (THC) Up 17.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Tenet Healthcare (THC - Free Report) . Shares have added about 17.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Tenet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Tenet Healthcare Q3 Earnings & Revenues Beat Estimates

Tenet Healthcare Corporation’s third-quarter 2019 adjusted net income of 58 cents per share, beat the Zacks Consensus Estimate by 107.1% on the back of volume growth and better revenues. Moreover, the bottom line shot up 100% year over year.

Quarterly Operational Update

Net operating revenues came in at $4.5 billion, up 1.8% year over year. Additionally, the top line beat the Zacks Consensus Estimate by 2.4% on contributions from the Hospital & Other and Ambulatory segments.

Hospital segment’s same-hospital admissions were up 3.6% year over year.

Quarterly Segment Details

Hospital & Other


Net operating revenues in the Hospital Operations and Other segment totaled $3.8 billion, up 2.3% year over year. This upside is mainly attributable to revenue growth on same-hospital basis. However, the same was partly offset by hospital divestitures.

On same-hospital basis, patient revenues were $3.56 billion, up 5.8% year over year.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $343 million, up 7.1% year over year.

Ambulatory Segment

The Ambulatory segment generated net operating revenues of $522 million, up 4% year over year.

Additionally, the segment reported adjusted EBITDA of $207 million, up 13.7% year over year.

Conifer Segment

Conifer’s revenues decreased 9.4% from the prior-year quarter’s level to $336 million. This was mainly due to the company’s client attrition following certain divestitures.

The segment’s adjusted EBITDA of $90 million was up 11.1% year over year.

Financial Position

As of Sep 30, 2019, Tenet Healthcare had cash and cash equivalents of $314 million, down 23.6% from the number at 2018 end.

The company exited the third quarter with $14.8 billion of long-term debt, up 1.5% from the 2018-end level.

Net cash provided by operating activities for the first nine months of 2019 was $713 million, down 10.8% year over year.

2019 Outlook

Post third-quarter results, the company revised its guidance. Revenues are now expected between $18.350 billion and $18.550 billion compared with the earlier view of $18-$18.4 billion.

Adjusted earnings per share are now projected between $2.25 and $2.91.

Adjusted EBITDA is estimated between $2.650 billion and $2.750 billion.

Tenet Healthcare anticipates adjusted free cash flow of $600-$800 million.

While net cash provided by operating activities is predicted between $1.045 billion and $1.325 billion.

Q419 Guidance

Following third-quarter results, the company provided an outlook for the fourth quarter. Tenet Healthcare now anticipates revenues in the range of $4.678-$4.878 billion for the current quarter. The company forecasts adjusted EBITDA between $749 million and $849 million. Adjusted earnings per share from continuing operations are likely to vary between 57 cents and $1.23.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Tenet has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Tenet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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