We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Q2 Boost for Tenet (THC): A Healthy Dose of Long-Term Gains
Read MoreHide Full Article
Tenet Healthcare Corporation (THC - Free Report) reported strong second-quarter 2024 results on Jul 24, before the opening bell. Since then, shares of the hospital company have gained 8.3% to $150.16, reflecting investor optimism about its improved outlook for 2024. With this increase, the stock is nearing its 52-week high of $155. Does the growing operational strength present a buying opportunity? Or does the proximity to its 52-week high warrant caution?
Before diving into these considerations, let's examine the highlights of THC's recent quarterly results and their implications for the company's future.
4 Major Takeaways From Q2 Earnings
Strong Top and Bottom-Line Performance: Tenet Healthcare's adjusted EPS of $2.31 surpassed the Zacks Consensus Estimate by 22.2%, reflecting a 60.4% year-over-year increase. The net operating revenues rose slightly to $5.103 billion, beating expectations by 2.5%. This growth was driven by higher same-hospital admissions, increased net revenue per case, and lower contract labor costs.
Raised Outlook Again: The company revised its 2024 forecast upward, with expected net operating revenues now between $20.6 billion and $21 billion, up from $20-$20.4 billion. Adjusted EBITDA is now estimated to be within the range of $3.825-$3.975 billion, up from the earlier view of $3.5-$3.7 billion. Adjusted EPS is now anticipated to be within $10.41-$11.12, higher than the previous guidance of $8.37-$9.41. The mid-point of the revised outlook implies a 54.2% rise from the 2023 figure.
Investing in Quality Assets: The company’s divestments of non-core and less profitable businesses freed up capital for higher-return investments. It is now prioritizing the expansion of low-cost, high-quality ambulatory surgical centers. It has added 11 new orthopedic centers in the second quarter. It invested $61 million in buying out six new ambulatory facilities during this period. The transformative efforts of the management aim to create a more predictable and capital-efficient business model, with plans for quality acquisitions in prime locations to support volume growth.
Increasing Demand: The company is experiencing strong demand for its services, which is expected to continue throughout the year. Improved labor market conditions and staffing solutions have enabled the company to hire more workers and reopen services previously closed due to pandemic-related challenges. This expansion in capacity is anticipated to meet the growing demand for services. A similar trend was observed with HCA Healthcare, Inc. (HCA - Free Report) in the second quarter, which also reported strong results.
Assessing THC’s Potential
The rising number of seniors in the population and the growing cases of diseases are expected to sustain long-term demand for hospital services. Tenet Healthcare, with its acquisitions and de novo facilities, is expected to capitalize on this trend. Its expansionary moves will help it capture more market share in a fragmented market. At the second-quarter end, it had stakes in 520 ambulatory surgery centers and 24 surgical hospitals.
The company expects its transformative efforts to not only boost margins and free cash flow but also create a mix of businesses that can thrive in any type of political and regulatory landscape. This reduces risks for investors, making this Zacks Rank #1 (Strong Buy) stock a safer choice for your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
Additionally, along with positive industry trends, THC’s focus on improving operational efficiency will keep expanding its profits. Its investments in selected AI-enabled technologies will boost the clinical and administrative workflow and efficiency. This will also likely help in reducing costs and waiting time for patients and improve their experience.
Price Performance & Valuation
THC stock has surged 98.7% in the year-to-date period, significantly outperforming the industry’s rally of 34.8% and the S&P 500 Index’s growth of 14.2%. In comparison, its peers like HCA Healthcare and Select Medical Holdings Corporation (SEM - Free Report) have gained 33.4% and 69.1%, respectively, during this time.
YTD Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, Tenet Healthcare is trading relatively cheap. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 14.69X, lower than the industry average of 15.24X. The company has a Value Score of A.
Image Source: Zacks Investment Research
Estimate Revisions
The Zacks Consensus Estimate for THC’s 2024 and 2025 EPS implies a 46.3% and 0.3% uptick, respectively, on a year-over-year basis. Encouragingly, the company is also witnessing northbound estimate revisions for the current and the next year. Similarly, the consensus mark for 2024 and 2025 revenues suggests a 1% and 3.6% increase, respectively.
Image Source: Zacks Investment Research
Final Thoughts: A Compelling Investment Opportunity
Tenet Healthcare's focus on operational efficiency, strategic capacity expansion and favorable industry trends position it for robust future growth. The company’s solid fundamentals, attractive valuation and recent upward revisions in estimates suggest a promising outlook. These factors make THC a compelling buy at current price levels for investors looking for a solid long-term investment in the growing healthcare sector.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Q2 Boost for Tenet (THC): A Healthy Dose of Long-Term Gains
Tenet Healthcare Corporation (THC - Free Report) reported strong second-quarter 2024 results on Jul 24, before the opening bell. Since then, shares of the hospital company have gained 8.3% to $150.16, reflecting investor optimism about its improved outlook for 2024. With this increase, the stock is nearing its 52-week high of $155. Does the growing operational strength present a buying opportunity? Or does the proximity to its 52-week high warrant caution?
Before diving into these considerations, let's examine the highlights of THC's recent quarterly results and their implications for the company's future.
4 Major Takeaways From Q2 Earnings
Strong Top and Bottom-Line Performance: Tenet Healthcare's adjusted EPS of $2.31 surpassed the Zacks Consensus Estimate by 22.2%, reflecting a 60.4% year-over-year increase. The net operating revenues rose slightly to $5.103 billion, beating expectations by 2.5%. This growth was driven by higher same-hospital admissions, increased net revenue per case, and lower contract labor costs.
Raised Outlook Again: The company revised its 2024 forecast upward, with expected net operating revenues now between $20.6 billion and $21 billion, up from $20-$20.4 billion. Adjusted EBITDA is now estimated to be within the range of $3.825-$3.975 billion, up from the earlier view of $3.5-$3.7 billion. Adjusted EPS is now anticipated to be within $10.41-$11.12, higher than the previous guidance of $8.37-$9.41. The mid-point of the revised outlook implies a 54.2% rise from the 2023 figure.
Investing in Quality Assets: The company’s divestments of non-core and less profitable businesses freed up capital for higher-return investments. It is now prioritizing the expansion of low-cost, high-quality ambulatory surgical centers. It has added 11 new orthopedic centers in the second quarter. It invested $61 million in buying out six new ambulatory facilities during this period. The transformative efforts of the management aim to create a more predictable and capital-efficient business model, with plans for quality acquisitions in prime locations to support volume growth.
Increasing Demand: The company is experiencing strong demand for its services, which is expected to continue throughout the year. Improved labor market conditions and staffing solutions have enabled the company to hire more workers and reopen services previously closed due to pandemic-related challenges. This expansion in capacity is anticipated to meet the growing demand for services. A similar trend was observed with HCA Healthcare, Inc. (HCA - Free Report) in the second quarter, which also reported strong results.
Assessing THC’s Potential
The rising number of seniors in the population and the growing cases of diseases are expected to sustain long-term demand for hospital services. Tenet Healthcare, with its acquisitions and de novo facilities, is expected to capitalize on this trend. Its expansionary moves will help it capture more market share in a fragmented market. At the second-quarter end, it had stakes in 520 ambulatory surgery centers and 24 surgical hospitals.
The company expects its transformative efforts to not only boost margins and free cash flow but also create a mix of businesses that can thrive in any type of political and regulatory landscape. This reduces risks for investors, making this Zacks Rank #1 (Strong Buy) stock a safer choice for your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
Additionally, along with positive industry trends, THC’s focus on improving operational efficiency will keep expanding its profits. Its investments in selected AI-enabled technologies will boost the clinical and administrative workflow and efficiency. This will also likely help in reducing costs and waiting time for patients and improve their experience.
Price Performance & Valuation
THC stock has surged 98.7% in the year-to-date period, significantly outperforming the industry’s rally of 34.8% and the S&P 500 Index’s growth of 14.2%. In comparison, its peers like HCA Healthcare and Select Medical Holdings Corporation (SEM - Free Report) have gained 33.4% and 69.1%, respectively, during this time.
YTD Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, Tenet Healthcare is trading relatively cheap. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 14.69X, lower than the industry average of 15.24X. The company has a Value Score of A.
Image Source: Zacks Investment Research
Estimate Revisions
The Zacks Consensus Estimate for THC’s 2024 and 2025 EPS implies a 46.3% and 0.3% uptick, respectively, on a year-over-year basis. Encouragingly, the company is also witnessing northbound estimate revisions for the current and the next year. Similarly, the consensus mark for 2024 and 2025 revenues suggests a 1% and 3.6% increase, respectively.
Image Source: Zacks Investment Research
Final Thoughts: A Compelling Investment Opportunity
Tenet Healthcare's focus on operational efficiency, strategic capacity expansion and favorable industry trends position it for robust future growth. The company’s solid fundamentals, attractive valuation and recent upward revisions in estimates suggest a promising outlook. These factors make THC a compelling buy at current price levels for investors looking for a solid long-term investment in the growing healthcare sector.