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Tenet (THC) Hits 52-Week High on Solid Q1, Raises'18 View

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Shares of Tenet Healthcare Corp (THC - Free Report) scaled a 52-week high of $33.67 in yesterday’s trading session before closing a tad lower at $33.50, generating a skyrocketing year-to-date rate of nearly 121%. The stock has therefore substantially outperformed the industry’s 12.5% rally. This uptrend was primarily driven by the company’s solid performance in the first quarter and its raised guidance for 2018.

 

We believe this Zacks Rank #2 (Buy) stock to possess great growth potential, which is also apparent from its favorable Growth Score of B. Its long-term earnings growth rate stands at 13%.

Now let’s dig deeper to analyze the reasons behind the company’s stock appreciation.

Solid 1Q18 Results: Tenet’s shares have surged 39.9%, ever since the diversified healthcare services company exhibited a sturdy performance in all its segments.  The bottom line of 57 cents per share came in against the Zacks Consensus Estimate of a loss of 2 cents and rebounded from the previous year’s loss of 27 cents.

Banking on first-quarter outperformance, the company raised its 2018 guidance. Adjusted earnings per share are projected between $1.36 and $1.70, up from the earlier expectation of 73 cents-$1.07. Revenues are estimated in the range of $17.9-$18.3 billion. Tenet Healthcare anticipates adjusted free cash flow of $725-$925 million, up from $675-$875 million. It also lifted the upper end of the outlook provided for net cash from operating activities by $0.1 billion and now predicts the same between $1.245 billion and $1.550 billion.

Executive Appointments: On May 16, Tenet announced to have appointed Paola Arbour as Senior Vice President and Chief Information Officer and Marie Quintana as Senior Vice President and the Chief Marketing Officer. The expertise and knowledge of both should drive the company's performance in the future.

Rating Upgrade: Recently, Moody's Investors Service has affirmed the B2 Corporate Family Rating and B2-PD Probability of Default Rating, senior secured rating of Ba3, Speculative Grade Liquidity Rating of SGL-2 and unsecured rating of Caa1. The rating agency upgraded the outlook to stable from negative to account for the benefits of $250 million derived from cost-reduction plan as well as a slight recovery in patient volumes.

To wrap up, the above-mentioned factors along with the company’s core strength are likely to help Tenet continue its bull run.

Other Stocks to Consider

Investors looking for other stocks worth considering from the same industry might also check out WellCare Health Plans, Inc. , Anthem, Inc. and Humana Inc. (HUM - Free Report) .

WellCare Health provides managed care services for government-sponsored health care programs. The company currently sports a Zacks Rank #1 (Strong Buy) and shows a positive earnings surprise in all the trailing four quarters with an average beat of 51.70%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Operating as a health benefits company in the United States, Anthem pulled of an impressive positive earnings surprise of 7.22% over the last four quarters. Currently, it carries a Zacks Rank #2 (Buy).

Humana works as a health and well-being company in the United States. It delivered a positive surprise of 6.16%. It currently has a Zacks Rank of 2.
 

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