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Tenet Healthcare's Strategic Initiatives Aid, Revenues Drag

Zacks Equity Research

Tenet Healthcare Corporation THC is well poised for progress on the back of its inorganic growth strategies.

The company’s inorganic growth story highlights acquisitions made over the past many years that have helped it boost its scale of business, expand its existence in new geographies and enhance its operating capacity. Apart from forging links with leading health insurers, Tenet Healthcare has upped its buyout game to enrich its capabilities. In 2018, the company acquired 10 outpatient businesses, three off-campus emergency departments and numerous physician practices. All these strategic buyouts bode well for the company.

Tenet Healthcare is also busy streamlining its operations reflected in a number of divestitures undertaken over the past three years. Last year, it sold nine Aspen facilities in the United Kingdom and eight hospitals in the United States. These deals generated proceeds worth more than $1 billion, which have been used to pay off the company’s debt and maintain its financial liquidity.

In July, it announced its plan to spin off of its Conifer business as an independent publicly traded company. It expects to close the spin-off by the end of second-quarter 2021. The segment has been witnessing a weak performance over the last few quarters. Funds from this deal are also expected to paying down the company’s debts. We also note that the company’s debt levels slipped 1.9% and 1% in 2017 and 2018, respectively.

However, the company has been exposed to declining revenues over the last few quarters due to reduced admissions, inpatient and outpatient surgeries, emergency department visits and total outpatient visits. For 2019, the company expects revenues in the range of $18-$18.4 billion, the mid-point indicating a dip of 0.5% from the reported figure of 2018.  

Stocks That Warrant a Look

Some stocks worth a look from the medical sector are HCA Healthcare, Inc. HCA, Molina Healthcare, Inc. MOH and Anthem, Inc. ANTM.

HCA provides health care services. In the last four quarters, the company delivered average beat of 15.74%.

Molina offers Medicaid-related solutions to meet the healthcare needs of low-income families and individuals. In the trailing four quarters, the company’s average beat was 66.9%.

Anthem works as a health benefits company in the United States. In the last four quarters, the company pulled off average beat of 4.57%.

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