A month has gone by since the last earnings report for Tenet Healthcare (THC). Shares have added about 0.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Tenet Healthcare’s 3Q18 Earnings Beat, Improve Y/Y
Tenet Healthcare Corporation delivered third-quarter 2018 adjusted net earnings of 29 cents per share, outperforming the Zacks Consensus Estimate by 163.6%. This upside is primarily driven by the performance of the USPI and Conifer Segments. Moreover, the bottom line reversed the year-ago loss of 17 cents.
Quarterly Operational Update
Net operating revenues came in at $4.5 billion, down 2.1% year over year. However, the top line beat the Zacks Consensus Estimate by 2.5%. This was due to weak performances by the company’s hospitals.
Tenet Healthcare’s same-hospital exchange admissions were 4577, down 4% year over year.
Same-hospital exchange outpatient visits were 51,539, up 8.1% year over year.
Quarterly Segment Details
Hospital & Other
Net operating revenues in the Hospital Operations and Other segment totaled $3.7 billion, down 2.7% year over year. This downside is largely attributable to hospital divestitures, partially offset by same hospital revenue growth.
On same-hospital basis, patient revenues were $3.4 billion, up 6% year over year.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $312 million, up 16% year over year.
The Ambulatory segment generated net operating revenues of $502 million, up 7.3% year over year.
Additionally, the segment reported adjusted EBITDA of $184 million, up 15.7% year over year.
Conifer’s revenues decreased 7.5% from the prior-year quarter’s level to $371 million. This was mainly due to the company’s divestment activities by Tenet and other customers.
The segment reported $81 million of adjusted EBITDA in the quarter under review, up 2.5% year over year.
As of Sep 30, 2018, Tenet Healthcare had cash and cash equivalents of $500 million, down 18.2% from the number at year-end 2017.
The company exited the third quarter with $14.1 billion of long-term debt, down 4.1% from the count at 2017 end.
Net cash provided by operating activities for the first nine months of 2018 stands at $799 million, up 12.7% year over year.
Adjusted earnings per share are projected between $1.44 and $1.83, down from the earlier projection of $1.54-$1.88.
Tenet Healthcare’s expectation for revenues is in the range of $18.1-$18.3 billion, up from $17.9-$18.3 billion.
Adjusted EBITDA is now estimated between $2.52 and $2.57 billion, down from the previous range of $2.55-$2.65 billion.
Tenet Healthcare now projects its adjusted free cash flow of $600-$800 million, down from $725-$925 million.
The company has lowered its net cash provided by operating activities from $1.245-$1.550 billion to $1.060-$1.335 billion.
The company now anticipates revenues in the band of $4.42-$4.62 billion, up from the earlier prediction of $4.3-$4.5 billion.
The company now envisions adjusted EBITDA between $649 million and $699 million, up from the previous forecast of $575-$625 million. It increased the high end of its adjusted earnings per share from continuing operations to a range of 10 cents to 48 cents from the past estimate of 10-24 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -51.35% due to these changes.
At this time, Tenet has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Tenet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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