Tenet Healthcare (THC) Gains 89% in a Year: More Room to Run?

Shares of Tenet Healthcare Corporation THC have surged 88.7% in the past year compared with the industry’s 25% growth. The Medical sector has gained 4.6% and the S&P 500 composite index has risen 26% in the same time frame. With a market capitalization of $12.9 billion, the average volume of shares traded in the last three months was 1.3 million.

Growing admissions and hospital surgeries, strategic portfolio transformation, acquisitions and an impressive financial position continue to drive Tenet Healthcare.

This diversified healthcare services company, sporting a Zacks Rank #1 (Strong Buy) at present, boasts an impressive record of beating estimates in the trailing four quarters, the average surprise being 56.5%.

 

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Image Source: Zacks Investment Research

 

Can THC Retain the Momentum?

The Zacks Consensus Estimate for 2024 earnings is pegged at $8.42 per share, which has witnessed seven upward estimate revisions in the past 60 days against none in the opposite direction. The estimate has improved 40.8% during this period.

The consensus estimate for 2025 earnings is $8.43 per share, which indicates an improvement of 0.1% from the 2024 estimate. The consensus mark for revenues is pegged at $21.1 billion, suggesting 3.7% growth from the 2024 estimate.

Tenet Healthcare's revenues remain on an upward trajectory, driven by the growth in adjusted admissions and emergency room visits. In the first quarter, these metrics saw impressive year-over-year increases of 1.8% and 3.9%, respectively. Such improvements indicate rising patient volumes and higher acuity levels, which are favorable for any healthcare facility operator, including THC. This positive trend underscores the company's ability to attract and serve patients effectively, thereby contributing to its overall financial health and operational success.

Management anticipates revenues to be between $20 billion and $20.4 billion for 2024.  The resumption of deferred elective procedures is likely to sustain growing revenues from THC’s extensive network of surgery centers in the days ahead. At the end of the first quarter, Tenet Healthcare’s subsidiary, USPI, had interests in more than 512 ambulatory surgery centers (ASCs) and 25 surgical hospitals across 38 states.

Tenet Healthcare resorts to acquisitions and partnerships to bolster its capabilities, grow the care network and expand its geographical presence. It purchased controlling ownership interests in 45 ASCs and inaugurated one de novo ASC in the first quarter.

To strategically reshape its portfolioand better direct capital to areas that fetch a higher return, THC undertakes divestitures and targets to get rid of business units not core to the long-term growth strategy. The proceeds derived from such divestitures are often used to pay off the debt level and bring down the mounting interest expense. Since the beginning of 2024, it has sold four Orange County and Los Angeles County hospitals to UCI Health, two San Luis Obispo County hospitals to Adventist Health and three South Carolina hospitals to Novant Health.

To engage in business investments successfully, Tenet Healthcare relies on its solid financial foundation, characterized by ample cash reserves and strong cash generation capabilities. In the first quarter, the company generated $586 million in cash from operations, marking a notable 30.5% year-over-year increase. Moreover, its leverage ratio has steadily improved over the past four years. The company ended the first quarter with a total debt-to-total capital ratio of 72.3% compared with the industry average of 93.4%. This financial strength empowers Tenet Healthcare to pursue strategic investments with confidence and capitalize on growth opportunities efficiently.

Tenet Healthcare boasts an impressive VGM Score of B. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.

Other Stocks to Consider

Some other top-ranked stocks from the Medical space are Organon & Co. OGNLantheus Holdings, Inc. LNTH and The Pennant Group, Inc. PNTG. Organon currently sports a Zacks Rank of 1, and Lantheus and Pennant carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Organon’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, the average surprise being 13.62%. The consensus estimate for OGN’s 2024 earnings and revenues suggests an improvement of 6.8% and 1.7% from the respective 2023 reported figures.

The consensus estimate for Organon’s 2024 earnings has moved 4% north in the past 30 days.

Lantheus’ earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 13.61%. The consensus estimate for LNTH’s 2024 earnings and revenues suggests an improvement of 14.1% and 17.2% from the respective 2023 reported number.

The consensus estimate for Lantheus’ 2024 earnings has moved 8.4% north in the past 30 days.

Pennant’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and matched the mark once, the average surprise being 7.22%. The consensus estimate for PNTG’s 2024 earnings and revenues suggests an improvement of 20.6% and 16.3% from the respective 2023 reported figures.  

The consensus estimate for Pennant’s 2024 earnings has moved 1.1% north in the past 30 days.

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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.

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