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Tenet Healthcare Plunges 55.7% YTD: Will the Stock Rebound?
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Tenet Healthcare Corporation (THC - Free Report) stock has plunged so far this year due to the widespread volatility induced by COVID-19, which compelled the company to withdraw its earnings guidance.
Shares of this currently Zacks Rank #3 (Hold) player have lost 55.7% year to date, wider than its industry's decline of 37.1%.
The company witnessed a fall in outpatient and Emergency Room volume at hospitals following government rules as well as in fear of COVID-19 patients’ entry to the premises.
Its revenues have been declining over the last few quarters due to reduction in admissions, inpatient and outpatient surgeries, emergency department visits as well as total outpatient visits. In the first quarter of 2020, the metric dipped 0.6% year over year due to lower contribution from Hospital operations and Conifer segments.
In April, the company’s hospital, physician and surgery center volumes remained depressed. Moreover, the coronavirus outbreak required hospitals to keep their elective procedures on hold to accommodate any potential spike in COVID-19-infected admissions. This cancellation in elective surgeries will in turn, hurt the company’s revenues.
Moreover, Tenet Healthcare’s Conifer segment has been suffering over the last several quarters due to client attrition. In the first quarter, Conifer’s revenues decreased 4.9% from the prior-year quarter’s level. Per management, the company will complete the spin-off of its Conifer business into an independent publicly-traded entity by the end of second-quarter 2021. It is likely to reduce its debt burden by using proceeds from this transaction.
Lack of solvency also remains a concern for us. The company’s times interest earned now is 1.3X, much lower than its industry’s average of 2.7X. As of May 1, 2020, the company had $2.2 billion of excess cash in hand and $1.9 billion of capacity available under its credit facility. However, the same is much lower than its long-term debt of $15 billion. Moreover, a significant portion of cash needs to be repaid to the government for advances received.
Will the Stock Bounce Back?
Against all odds, it should be noted that the company’s solid fundamentals will help it turn around once the overall economic condition improves.
The stock carries an attractive VGM Score of B as well. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
The company’s cost-controlling initiatives helped it reduce its expenses in 2018 and 2019. Its cost-management program comprised primarily of headcount reductions and the renegotiation of contracts with suppliers and vendors.
In response to the present scenario, the company furloughed employees. It also planned a cutback in supply, inventory and other purchased services. These cost-saving measures should aid margins.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early. See the 5 high-tech stocks now>>
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Tenet Healthcare Plunges 55.7% YTD: Will the Stock Rebound?
Tenet Healthcare Corporation (THC - Free Report) stock has plunged so far this year due to the widespread volatility induced by COVID-19, which compelled the company to withdraw its earnings guidance.
Shares of this currently Zacks Rank #3 (Hold) player have lost 55.7% year to date, wider than its industry's decline of 37.1%.
The performance looks weaker than the stock movement of other companies in the same space, such as HCA Healthcare, Inc. (HCA - Free Report) , Universal Health Services, Inc. (UHS - Free Report) and Community Health Systems, Inc. (CYH - Free Report) , which have lost 35.9%, 38.1% and gained 3.8%, respectively, in the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company witnessed a fall in outpatient and Emergency Room volume at hospitals following government rules as well as in fear of COVID-19 patients’ entry to the premises.
Its revenues have been declining over the last few quarters due to reduction in admissions, inpatient and outpatient surgeries, emergency department visits as well as total outpatient visits. In the first quarter of 2020, the metric dipped 0.6% year over year due to lower contribution from Hospital operations and Conifer segments.
In April, the company’s hospital, physician and surgery center volumes remained depressed. Moreover, the coronavirus outbreak required hospitals to keep their elective procedures on hold to accommodate any potential spike in COVID-19-infected admissions. This cancellation in elective surgeries will in turn, hurt the company’s revenues.
Moreover, Tenet Healthcare’s Conifer segment has been suffering over the last several quarters due to client attrition. In the first quarter, Conifer’s revenues decreased 4.9% from the prior-year quarter’s level. Per management, the company will complete the spin-off of its Conifer business into an independent publicly-traded entity by the end of second-quarter 2021. It is likely to reduce its debt burden by using proceeds from this transaction.
Lack of solvency also remains a concern for us. The company’s times interest earned now is 1.3X, much lower than its industry’s average of 2.7X. As of May 1, 2020, the company had $2.2 billion of excess cash in hand and $1.9 billion of capacity available under its credit facility. However, the same is much lower than its long-term debt of $15 billion. Moreover, a significant portion of cash needs to be repaid to the government for advances received.
Will the Stock Bounce Back?
Against all odds, it should be noted that the company’s solid fundamentals will help it turn around once the overall economic condition improves.
The stock carries an attractive VGM Score of B as well. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
The company’s cost-controlling initiatives helped it reduce its expenses in 2018 and 2019. Its cost-management program comprised primarily of headcount reductions and the renegotiation of contracts with suppliers and vendors.
In response to the present scenario, the company furloughed employees. It also planned a cutback in supply, inventory and other purchased services. These cost-saving measures should aid margins.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>