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Why You Should Hold Tenet Healthcare (THC) in Your Portfolio

Zacks Equity Research

Tenet Healthcare Corporation THC is well-poised for development on the back of its strategic alliances and divestitures.

The company also flaunts a praiseworthy earnings surprise history, having outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 115.08%. This trend of successive estimate beats supports the company’s operating efficiency.

The company is well-placed for growth, evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

Tenet Healthcare recently delivered first-quarter 2019 adjusted net earnings of 54 cents per share, outperforming the Zacks Consensus Estimate by 80% on the back of operational excellence.

It even boasts a strong inorganic growth history. Several buyouts, alliances, etc. have helped the company boost its scale of business, operating capacity and an expanding geographical presence. Certain partnerships like that of Blue Cross Blue Shield of Texas, Cigna, Aetna, UnitedHealth, Humana, etc. poise the company for long-term growth.

Moreover, the company is steadily focused on divesting its non-core and unprofitable business units in order to repay its debt and maintain financial liquidity. A number of divestitures made in the past three years have streamlined its operations and generated funds to pay down debt. The company’s strategic priorities include completion of hospital divestments and allocation of capital to higher return investments across the capital structure.

However, the company’s revenues have been declining over the last few quarters due to reduced admissions, inpatient and outpatient surgeries, emergency department visits and total outpatient visits. Due to poor performances in the company’s Hospital and other segments, the top line is going to suffer in the near term as well.

The long-term earnings growth rate is expected at 23.3%, above the industry’s average of 18.7%, which is an upside for the company.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $2.32, indicating an increase of 24.7% from the year-ago reported figure.

For 2020, the Zacks Consensus Estimate for earnings stands at $2.61 on $18.68 billion revenues, implying a respective 12.3% and 2.6% improvement from the prior-year reported numbers.

Shares of this Zacks Rank #3 (Hold) company have lost 36.2% in a year's time against its industry’s rise of 5.4%.

Stocks to Consider

Investors interested in the medical sector can take a look at some better-ranked stocks like The Joint Corp. JYNT, Molina Healthcare, Inc MOH and WellCare Health Plans, Inc. WCG. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Joint Corp. develops, owns, operates, supports and manages chiropractic clinics. In the last four quarters, the company delivered average beat of 190%. The stock sports a Zacks Rank #1.

Molina offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. The stock hasa Zacks Rank of 1. In the trailing four quarters, the company came up with average beat of 88.17%.

WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 13.52% in the preceding four quarters. The stock has a Zacks Rank #2 (Buy).

 

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