Tenet Healthcare Corp.
) reported third-quarter 2013 income from continuing operations
of 45 cents per share that missed the Zacks Consensus Estimate of
46 cents per share. However, earnings improved from 33 cents in
the year-ago quarter.
The strong performance of Tenet Healthcare's hospitals, growth
in revenues along with cost control measures fueled the
Including restructuring charges, acquisition related costs and
litigation and investigation costs, net income during the third
quarter stood at 27 cents per share, down from 37 cents in the
prior year quarter.
Net operating revenues stood at $2.41 billion, up 8.4% from
the prior-year quarter. However, revenues were in line with the
Zacks Consensus Estimate.
Improved terms of commercial managed care contracts and an
improvement in Medicaid revenues that resulted from the
California Provider Fee program and the Texas uncompensated care
1115 waiver program spurred Tenet Healthcare's net patient
revenues per adjusted admission by 3% year-over-year to
Total admissions declined 2.6% from the year-ago quarter,
while adjusted admissions declined 0.5% year over year due to
lower inpatient admissions. On the other hand, the area of
strategic focus viz surgeries increased 17.8% while emergency
department visits grew 3.1%.
Although bad debt expense increased during the quarter due to
higher uninsured revenues, bad debt expense, as a percentage of
revenues, decreased 50 basis points year over year to 8%.
Tenet Healthcare's adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) improved 7.1% year over
year to $288 million in the third quarter. The improvement was
mainly due to higher revenues that offset the increase in
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Tenet Healthcare exited the reported quarter with cash and cash
equivalents of $82 million, down from $364 million as of Dec 31,
2012. As of Sep 30, 2013, total assets of Tenet Healthcare were
$9.3 billion and shareholder equity was $825 million.
Net cash flow from operating activities in the first nine months
of 2013 was $334 million, down from $337 million in the year ago
Tenet Healthcare's capital expenditure increased to $142 million
in the third quarter of 2013 from $108 million in the year-ago
Tenet Healthcare repurchased 2.6 million shares under its $500
million share buyback program during the third quarter. Currently
Tenet Healthcare is left with shares worth $100 million under its
Assuming that the soft inpatient volume growth trend and less
attractive payer mix will persist through the fourth quarter,
Tenet Healthcare announced that it expects adjusted EBITDA of
$400 million to $450 million in the fourth quarter of 2013. The
Vanguard acquisition, completed in early Oct 2013, is not
expected to add much to the adjusted EBITDA in the upcoming
The lower end of the adjusted EBITDA guidance for 2013 was cut to
$1.298. However, the higher end was reiterated at $1.3 billion
(old guidance: $1.25-$1.3 billion). The mid-point of the guidance
represents an 8% increase from 2012.
Tenet Healthcare exceeded the year-ago numbers but missed our
earnings expectation by a penny. Top line fared well being in
line with the Zacks Consensus Estimate and beating the year-ago
Tenet Healthcare recently completed the acquisition of Vanguard
which complements the company's strategy of expanding its
operating and competitive leverage in metropolitan markets via
inorganic growth. This acquisition will thus diversify Tenet's
business portfolio and help it to post better numbers going
forward. As per the healthcare reforms in the U.S., effective Jan
1, 2014, it will be mandatory for U.S. citizens to have medical
insurance coverage. This provides ample growth opportunities for
healthcare providers. With its enhanced product offering due to
the Vanguard acquisition, Tenet is well positioned to cater to
the additional demand and capitalize on the opportunities.
Among other players in the industry,
UnitedHealth Group Inc.
) reported third-quarter 2013 earnings of $1.53 per share, a
penny below the Zacks Consensus Estimate. Earnings, however, grew
2.0% year over year.
Tenet Healthcare carries a Zacks Rank #3 (Hold).
Acadia Healthcare Company, Inc.
VCA Antech Inc.
) are some of the companies in the financial services space that
carry a Zacks Rank #2 (Buy) and appear well-positioned.