Tenet Misses Est, Grows Y/Y

Zacks

Tenet Healthcare Corp. (THC) reported fourth-quarter 2012 earnings from continuing operations of 52 cents per share, falling short of the Zacks Consensus Estimate of 69 cents. Operating earnings bounced back from a loss of 55 cents in the year-ago quarter.

Growth in revenues, largely driven by higher volumes and improved pricing fueled the year-over-year improvement, along with cost control measures.

Net income, including loss from discontinued operations of $8 million or 7 cents a share, was $49 million or 45 cents per share in the reported quarter, recovering from a loss of $76 million or 70 cents in the year-ago quarter. Net income for the fourth quarter of 2011 includes $74 million or 68 cents per share related to a loss on early extinguishment of debt and $16 million or 15 cents per share related to a loss from discontinued operations.

Operational Update

Net operating revenues stood at $2.33 billion, up 7.3% from $2.17 billion in the prior-year quarter. However, reported revenues lagged the Zacks Consensus Estimate of $2.52 billion.

During the reported quarter, Tenet Healthcare’s net patient revenues per adjusted admission increased 2.8% on a year-over-year basis to $11,866, primarily due to improved terms of commercial managed care contracts and increased Medicare reimbursement rates, partly offset by a less-favorable payer mix.

Total admissions remained at the year-ago quarter’s level, while adjusted admissions increased 2.9% year over year due to higher outpatient visits. Surgeries increased 7.5% while emergency department visits improved 8.6%.

Bad debt expense, as a percentage of revenues, increased 20 basis points year over year to 7.9%, stemming from an upsurge in the number of uninsured patients.

Tenet Healthcare posted adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) of $336 million in the reported quarter, up 16.7% from $288 million in the prior-year quarter. Adjusted EBITDA margin was 14.4%, expanding 110 basis points year over year. 

Full-Year 2012 Highlights

For full year 2012, Tenet Healthcare reported operating income of $1.70 per share, missing the Zacks Consensus Estimate of $1.96 but ahead of the year-ago level of 56 cents. Operating income increased to $185 million from $68 million in 2011.

Tenet Healthcare’s net operating revenue amounted to $9.12 billion in 2012, lagging the Zacks Consensus Estimate of $9.88 billion but 5.4% higher than $8.65 billion reported in 2011. Moreover, adjusted EBITDA grew 6.8% year over year to $1.20 billion in 2012.

Additionally, net income was $141 million or $1.30 per share compared with $58 million or 48 cents per share in 2011.

Financial Position

Tenet Healthcare exited 2012 with cash and cash equivalents of $364 million, surging from $113 million as of Dec 31, 2011. As of Dec 31, 2012, total assets of Tenet Healthcare were $9.04 billion and shareholders’ equity was $1.14 billion.

Net cash flow from operating activities in 2012 was $593 million, improving from $497 million in 2011.

Tenet Healthcare’s capital expenditures decreased to $148 million in the quarter from $177 million in the prior-year quarter.

Guidance

Tenet Healthcare announced its adjusted EBITDA guidance of $250 million to $290 million for the first quarter of 2013. Adjusted EBITDA guidance for 2013 was affirmed at $1.325–$1.425. The first quarter guidance excludes any contribution associated with the managed care portion of the 30 month California Provider Fee program.

Operating income is projected to be about $835–$965 million. Additionally, shares outstanding as of Dec 31, 2013 are expected to be approximately 104 million. Consequently, adjusted earnings per share for 2013 are expected to be about $2.31-$3.31 for 2013.

Further, net income in 2013 is anticipated around $118–$234 million.

Results at Other Medical Companies

Health Management Associates (HMA), a leading operator of general acute care hospitals, reported fourth quarter and 2012 adjusted (excluding one-time expenses other than stock-based compensation expense) earnings per share of 19 cents and 75 cents, respectively, missing the corresponding Zacks Consensus Estimates of 20 cents and 83 cents.

Community Health Systems, Inc. (CYH) declared its fourth-quarter earnings of 85 cents per share, at par with the Zacks Consensus Estimate but striding ahead of the year-ago earnings of 82 cents.

Acadia Healthcare Company, Inc. (ACHC) reported adjusted income of 19 cents per share in the fourth quarter of 2012, in line with the Zacks Consensus but beating the year-ago period’s earnings of 13 cents.

Zacks Rank

Tenet Healthcare carries a Zacks Rank #2 (Buy).

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