Hospital company Tenet Healthcare Corporation THC is set to report its third-quarter 2024 results on Oct. 29, 2024, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at $2.33 per share and $5.05 billion, respectively.
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The earnings estimate for the to-be-reported quarter has remained stable over the past 60 days. The bottom-line projection indicates year-over-year growth of 61.8%. However, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year decrease of 0.4%.
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For the current year, the Zacks Consensus Estimate for Tenet Healthcare’s revenues is pegged at $20.8 billion, implying a rise of 1.2% year over year. Also, the consensus mark for current year EPS is pegged at $10.72, implying a jump of around 53.6% on a year-over-year basis.
Tenet Healthcare beat the consensus estimate for earnings in each of the trailing four quarters, with the average surprise being 58.5%, as you can see below.
Tenet Healthcare Corporation Price and EPS Surprise
Tenet Healthcare Corporation price-eps-surprise | Tenet Healthcare Corporation Quote
THC’s Q3 Earnings Whispers
However, our proven model does not conclusively predict an earnings beat for Tenet Healthcare this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
THChas an Earnings ESP of -0.14% and a Zacks Rank #2.
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Let’s see how things have shaped up before the third-quarter earnings announcement.
Q3 Factors to Note for THC
With seniors continuing to resume elective procedures that were delayed due to pandemic-related constraints, Tenet Healthcare is expected to have witnessed higher admissions and occupancy rates in the third quarter. The Zacks Consensus Estimate and our model estimate for adjusted patient admissions in total hospital operations suggest 5.4% year-over-year growth.
On the same hospital basis, the consensus estimate and our model estimate for adjusted patient admissions indicate a 6.1% increase from a year ago. 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 12.4% growth from the prior-year quarter’s figure, whereas the consensus estimate predicts a 13.6% increase.
The Zacks Consensus Estimate for adjusted EBITDA from Ambulatory Care operations suggests 17% year-over-year growth. Higher patient service revenues are likely to have provided a boost in the third quarter. The consensus mark for net patient revenues per adjusted admission in total Hospital in the third quarter signals 1.7% year-over-year growth.
Similarly, both the consensus estimate and our model estimate suggest third-quarter total hospital patient days to have increased 3.3% year over year. The above-mentioned factors are likely to have benefited THC’s results in the quarter under review, positioning its profits for year-over-year growth.
However, the Zacks Consensus Estimate for hospital operations and other revenues for the third quarter is pegged at $3.96 billion, indicating a 4% decline from the year-ago period, which is likely to have led to a year-over-year decline in the top line.
Both the Zacks Consensus Estimate and our model estimate for the average length of stay in total Hospital indicate a 3% decrease from a year ago. Also, with increased utilization, supply costs are expected to have increased in the third quarter, trimming margins and making an earnings beat uncertain.
THC’s Price Performance Comparison
Tenet Healthcare's stock has exhibited an upward movement, gaining a notable percentage over the year-to-date period. It has jumped 99.9% compared with the industry’s rise of 47.8%. In comparison, some of its peers, like HCA Healthcare, Inc. HCA and Community Health Systems, Inc. CYH, have gained 47.3% and 35.7%, respectively, during this time. Additionally, THC stocks have outperformed the S&P 500 significantly, which has increased 21.5% during the same period.
THC YTD Price Performance
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THC’s Valuation
Now, let’s look at the value Tenet Healthcare offers investors at current levels.
Despite the share price appreciation, the company’s valuation looks relatively cheap compared with the industry average. Currently, THC is trading at 13.77X forward 12 months earnings, below the industry’s average of 16X.
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Investor Considerations
Tenet Healthcare is investing in AI-powered technologies to streamline both clinical and administrative processes, which should help lower costs, reduce patient wait times and boost patient satisfaction.
The company is strategically divesting its non-core and less profitable businesses, reallocating capital to higher-return investments. It is focusing 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 strategy of divesting non-core assets and reallocating capital to high-margin operations, along with strong performance in its Ambulatory Care segment, growth in admissions, and higher revenue per admission, positions it well for sustained growth.
While an earnings beat may be uncertain this quarter, its rising cash levels, reduced debt and effective management enhance its overall outlook.Given these positive indicators, long-term growth potential and attractive valuation, Tenet Healthcare stock presents a compelling buy opportunity for investors now.
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Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
