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Buying Tenet (THC) Pre-Q2 Earnings: A Prescription for Profits?
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Tenet Healthcare Corporation (THC - Free Report) is set to report second-quarter 2024 results on Jul 24, 2024, before the opening bell. Rising admissions, average length of stay and patient days are expected to have supported its performance.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $1.89 per share, implying solid growth of 31.3% from the year-ago reported number. The estimate has been revised upward by 6 cents over the past 30 days. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at almost $5 billion, which, however, suggests a 2% fall from the year-ago actuals.
Image Source: Zacks Investment Research
Tenet Healthcare has a robust history of surpassing earnings estimates, beating the consensus in each of the last four quarters, with the average being 56.5%. This is depicted in the graph below.
Tenet Healthcare Corporation Price and EPS Surprise
Our proven model predicts a likely earnings beat for the company this time around as well. THC has an Earnings ESP of +4.11% as the Most Accurate Estimate of $1.97 per share is currently pegged higher than the Zacks Consensus Estimate of $1.89. Also, it currently has a Zacks Rank #2 (Buy). The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat, which is precisely the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping THC’s Q2 Results
With seniors continuing resumption of elective procedures, which were delayed due to pandemic-related constraints, Tenet Healthcare is expected to have witnessed higher admissions and occupancy rates in the second quarter. The Zacks Consensus Estimate and our model estimate for adjusted patient admissions in total hospital operations suggest 1.3% year-over-year growth.
On the same hospital basis, the consensus estimate and our model estimate for adjusted patient admissions indicate a 1% increase from a year ago. However, the Zacks Consensus Estimate for hospital operations and other revenues for the second quarter is pegged at $3.9 billion, indicating a slight decline from the year-ago period, which is likely to have led to a year-over-year decline in the top line.
Meanwhile, the Ambulatory Care business is likely to have gained from better patient volumes, new service line growth and buyouts. Our model estimate for the Ambulatory Care segment’s operating revenues suggests 10.1% growth from the prior-year quarter’s figure, whereas the consensus estimate predicts an 11.7% gain.
The Zacks Consensus Estimate for adjusted EBITDA from Ambulatory Care operations suggests 3.7% year-over-year growth. Higher patient service revenues are likely to have provided a boost in the second quarter.
The consensus mark for net patient revenues per adjusted admission in total Hospital in the second quarter signals nearly 6% year-over-year growth. Both the Zacks Consensus Estimate and our model estimate for the average length of stay in total Hospital indicate a 3.4% increase from a year ago.
Similarly, both the consensus estimate and our model estimate suggest second-quarter total hospital patient days to have increased 5% year over year. The above-mentioned factors are likely to have benefited THC’s results in the quarter under review, positioning it for a likely earnings beat.
Price Performance & Valuation
Tenet Healthcare's stock has exhibited an upward movement, gaining a notable percentage over the year-to-date period. It has jumped 74.3% compared with the industry’s growth of 19.6%. In comparison, some of its peers, like HCA Healthcare, Inc. (HCA - Free Report) and Community Health Systems, Inc. (CYH - Free Report) , have gained 18.8% and 20.4%, respectively, during this time. Additionally, THC stocks have outperformed the S&P 500 significantly, which has rallied 15% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Tenet Healthcare offers investors at current levels.
The company’s valuation looks a bit stretched compared with the industry average. Currently, THC is trading at 15.04X forward 12 months earnings, slightly above the industry’s average of 14.51X. In comparison, HCA Healthcare is trading at 14.48X forward 12 months earnings.
Image Source: Zacks Investment Research
Investor Considerations
Tenet Healthcare is strategically divesting its non-core and less profitable businesses, reallocating capital to higher-return investments. This includes a strong focus on high-margin acute surgery operations, which are expected to enhance the company's value and support long-term growth. The Ambulatory Care segment, particularly through the operations of USPI, stands out as a significant growth driver. The company is actively acquiring lucrative assets for USPI, aiming to rapidly boost profitability. The expanding aging population, increases in admissions and revenue per admission at the same facility level are set to sustain performance improvements. Additionally, rising cash flows, liquidity position and a declining debt burden, alongside enhancing profitability, demonstrate effective management and strategic direction.
Conclusion
Tenet Healthcare's strategic divestments and capital reallocation to high-margin operations, combined with strong performance in the Ambulatory Care segment, admissions growth and rising patient revenues per admission, position the company for continued success. Rising cash levels, declining debt, and effective management further strengthen its outlook. Given these positive indicators, long-term growth potential and another earnings beat around the corner, investors can consider buying THC stock now.
Image: Bigstock
Buying Tenet (THC) Pre-Q2 Earnings: A Prescription for Profits?
Tenet Healthcare Corporation (THC - Free Report) is set to report second-quarter 2024 results on Jul 24, 2024, before the opening bell. Rising admissions, average length of stay and patient days are expected to have supported its performance.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $1.89 per share, implying solid growth of 31.3% from the year-ago reported number. The estimate has been revised upward by 6 cents over the past 30 days. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at almost $5 billion, which, however, suggests a 2% fall from the year-ago actuals.
Tenet Healthcare has a robust history of surpassing earnings estimates, beating the consensus in each of the last four quarters, with the average being 56.5%. This is depicted in the graph below.
Tenet Healthcare Corporation Price and EPS Surprise
Tenet Healthcare Corporation price-eps-surprise | Tenet Healthcare Corporation Quote
Q2 Earnings Whispers
Our proven model predicts a likely earnings beat for the company this time around as well. THC has an Earnings ESP of +4.11% as the Most Accurate Estimate of $1.97 per share is currently pegged higher than the Zacks Consensus Estimate of $1.89. Also, it currently has a Zacks Rank #2 (Buy). The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat, which is precisely the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping THC’s Q2 Results
With seniors continuing resumption of elective procedures, which were delayed due to pandemic-related constraints, Tenet Healthcare is expected to have witnessed higher admissions and occupancy rates in the second quarter. The Zacks Consensus Estimate and our model estimate for adjusted patient admissions in total hospital operations suggest 1.3% year-over-year growth.
On the same hospital basis, the consensus estimate and our model estimate for adjusted patient admissions indicate a 1% increase from a year ago. However, the Zacks Consensus Estimate for hospital operations and other revenues for the second quarter is pegged at $3.9 billion, indicating a slight decline from the year-ago period, which is likely to have led to a year-over-year decline in the top line.
Meanwhile, the Ambulatory Care business is likely to have gained from better patient volumes, new service line growth and buyouts. Our model estimate for the Ambulatory Care segment’s operating revenues suggests 10.1% growth from the prior-year quarter’s figure, whereas the consensus estimate predicts an 11.7% gain.
The Zacks Consensus Estimate for adjusted EBITDA from Ambulatory Care operations suggests 3.7% year-over-year growth. Higher patient service revenues are likely to have provided a boost in the second quarter.
The consensus mark for net patient revenues per adjusted admission in total Hospital in the second quarter signals nearly 6% year-over-year growth. Both the Zacks Consensus Estimate and our model estimate for the average length of stay in total Hospital indicate a 3.4% increase from a year ago.
Similarly, both the consensus estimate and our model estimate suggest second-quarter total hospital patient days to have increased 5% year over year. The above-mentioned factors are likely to have benefited THC’s results in the quarter under review, positioning it for a likely earnings beat.
Price Performance & Valuation
Tenet Healthcare's stock has exhibited an upward movement, gaining a notable percentage over the year-to-date period. It has jumped 74.3% compared with the industry’s growth of 19.6%. In comparison, some of its peers, like HCA Healthcare, Inc. (HCA - Free Report) and Community Health Systems, Inc. (CYH - Free Report) , have gained 18.8% and 20.4%, respectively, during this time. Additionally, THC stocks have outperformed the S&P 500 significantly, which has rallied 15% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Tenet Healthcare offers investors at current levels.
The company’s valuation looks a bit stretched compared with the industry average. Currently, THC is trading at 15.04X forward 12 months earnings, slightly above the industry’s average of 14.51X. In comparison, HCA Healthcare is trading at 14.48X forward 12 months earnings.
Image Source: Zacks Investment Research
Investor Considerations
Tenet Healthcare is strategically divesting its non-core and less profitable businesses, reallocating capital to higher-return investments. This includes a strong focus on high-margin acute surgery operations, which are expected to enhance the company's value and support long-term growth. The Ambulatory Care segment, particularly through the operations of USPI, stands out as a significant growth driver. The company is actively acquiring lucrative assets for USPI, aiming to rapidly boost profitability. The expanding aging population, increases in admissions and revenue per admission at the same facility level are set to sustain performance improvements. Additionally, rising cash flows, liquidity position and a declining debt burden, alongside enhancing profitability, demonstrate effective management and strategic direction.
Conclusion
Tenet Healthcare's strategic divestments and capital reallocation to high-margin operations, combined with strong performance in the Ambulatory Care segment, admissions growth and rising patient revenues per admission, position the company for continued success. Rising cash levels, declining debt, and effective management further strengthen its outlook. Given these positive indicators, long-term growth potential and another earnings beat around the corner, investors can consider buying THC stock now.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.