Back to top

Image: Bigstock

Tenet Healthcare (THC) Drops Plans to Spin Off Conifer Segment

Read MoreHide Full Article

Tenet Healthcare Corporation (THC - Free Report) announced that it has cancelled its decision to spin off its Conifer Health Solutions unit. THC dropped the plan based on current shareholder value opportunities and better business fundamentals.

The healthcare servcies player contemplated a tax-free splitting of Conifer. The deal was expected to close in the middle of 2022. The shedding of business was projected to reduce its debt burden. The business contributed to 6.3% of THC’s total revenues in 2021.

Tenet Healthcare dropped the formerly made decision (made in July 2019) because of improved financial profiles of Conifer and Tenet, such as Adjusted EBITDA margin improvement of more than 1,000 basis points at Conifer since 2017. Management also expects the Conifer segment to provide revenue growth in the mid- to high-single digits with a strong margin and cash flow profile in 2022.

Conifer is projected to gain from client wins, growth opportunities, operational excellence, new sales talent and technology, etc. Thus, the healthcare provider is retaining Conifer to boost shareholder value.

Apart from scrapping this decision, the hospital player reaffirmed its 2022 guidance. Per its fourth-quarter  press release, net income is projected to be $645-$775 million, indicating a decline from the 2021 figure of $915 million.
THC still expects the net operating revenues in the range of $19.50-$19.90 billion.

Adjusted EPS is expected within $5.86-$7.05, the mid point being down 14.8% from the 2021 reported figure.

The guidance for net cash provided by operations activities ranges from $1.150 billion to $1.450 billion, the mid point indicating a decrease of 17.1% from the 2021 reported figure. Free cash flow is expected in the band of $425-$675 million, implying a fall from the 2021 reported figure of $910 million.

For the current year, management expects the Conifer segment to report net operating revenues in the range of $1.325-$1.375 billion. Conifer’s Adjusted EBITDA is still projected in the band of $360-$370 million.

Shares of THC have gained 64.1% in a year's time, outperforming its industry's growth of 31.7%. THC currently has a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the medical space are Mednax, Inc. (MD - Free Report) , The Ensign Group Inc. (ENSG - Free Report) and Addus HomeCare Corporation (ADUS - Free Report) .

Mednax provides newborn, maternal-fetal, radiology, pediatric cardiology and other pediatric subspecialties physician services in the United States and Puerto Rico. MD sports a Zacks Rank #1 (Strong Buy). MD delivered a trailing four-quarter earnings surprise of 27.9%, on average.

Ensign Group provides health care services for the post-acute care continuum, urgent care center and mobile ancillary businesses in the United States. ENSG delivered a trailing four-quarter earnings surprise of 1.72%, on average. ENSG currently has a Zacks Rank #2 (Buy).

Addus HomeCare is a comprehensive provider of a broad range of social and medical services in the home. ADUS holds a Zacks Rank of 2. ADUS delivered a trailing four-quarter earnings surprise of 0.80%, on average.

Published in