On Aug 18, 2014, shares of Tenet Healthcare Corp. (THC) scaled a 52-week high of $60.24 on a solid second-quarter earnings beat. The year-to-date return from the stock came in at 42.3%, which was ahead of the S&P’s return of 6.7%. With respect to earnings performance, this healthcare service company delivered positive surprise in the three of last four quarters.
Tenet Healthcare posted earnings of 17 cents per share that surpassed the Zacks Consensus Estimate of a breakeven. Though the company reported net loss of 27 cents per share, it was narrower than the year-ago loss of 49 cents. Increase in patient volume, improvement in terms of the commercial managed care contracts and better performance in the Conifer services business drove higher revenues that exceeded the Zacks Consensus Estimate and company guidance. Adjusted EBITDA also surpassed the company’s expectation.
Based on strong results, Tenet Healthcare raised its expectations for 2014. It now expects to deliver earnings of 65 cents to $1.83 per share (up from 49 cents to $1.67 per share) on net operating revenue of $16–$16.25 billion (up from $15.7–$16 billion). The Zacks Consensus Estimate lies within the company’s guidance. The company also expects adjusted EBITDA between $1.85 billion and $1.95 billion, up from $1.8–1.9 billion guided earlier.
Tenet Healthcare has been steadily expanding its operating capacity via acquisitions and alliances. Early this month, a subsidiary of Tenet Healthcare acquired Emanuel Medical Center. Last month, the company inked a long-term deal with UnitedHealthcare, a subsidiary of UnitedHealth Group (UNH) and, Humana Inc. (HUM). In June, Tenet Healthcare, and Blue Cross and Blue Shield of Texas extended their agreement.
Riding on these positves. this Zacks Rank #2 (Buy) stock has been witnessing upward revisions in the Zacks Consensus Estimate in the last 30 days. For 2014, the Zacks Consensus Estimate moved north by 12.5% to $1.44 per share as 4 of 9 estimates raised their estimate while for 2015 it scaled 9.3% to $2.83 as 9 of 13 estimes moved up. The expected long-term earnings growth is 12.3%.
Other Stocks to Consider
Investors interested in healthcare service companies may consider HCA Holdings, Inc. (HCA) sporting a Zacks Rank #1 (Strong Buy).