Tenet Healthcare Corp. (THC - Analyst Report) is set to report second-quarter 2014 earnings results on Aug 4, 2014. Last quarter, it delivered a positive earnings surprise of 20.00%. Let us see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
From forming strategic alliances, establishing Accountable Care Organizations (ACOs) to integrating acquisitions, Tenet Healthcare, has carried out a number of initiatives in the last quarter that should help boost earnings. The company’s acquisition of Texas Regional Medical Center, alliance with Texas Tech University Health Sciences Center at El Paso, Cigna Corp. (CI - Analyst Report) , Florida Blue and Blue Cross and Blue Shield of Texas are worth mentioning in this regard.
However, Tenet Healthcare’s increased debt levels are a matter of concern and raise skepticism regarding an earnings beat in the quarter. In the last quarter, Tenet Healthcare also issued 5.00% senior notes worth $500 million that should increase debt levels and interest expense further, thereby weighing on the company financials.
Our proven model does not conclusively show that Tenet Healthcare is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Tenet Healthcare has an ESP of 0.00%. This is because the Most Accurate estimate stands at 6 cents per share and the Zacks Consensus Estimate is 0 cents per share, making the difference 0.00%.
Zacks Rank: Tenet Healthcare has a Zacks Rank #2 (Buy). Though Zacks Rank 1, 2 or 3 increase the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions momentum.
Other Stocks to Consider
Here are some companies in the medical sector you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Gentiva Health Services Inc. has Earnings ESP of +37.50% and a Zacks Rank #2.
Anacor Pharmaceuticals, Inc. has Earnings ESP of +3.18% and a Zacks Rank #3 (Hold).