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Tenet Healthcare (THC) Soars 69% YTD: More Room to Run?

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Tenet Healthcare Corporation (THC - Free Report) has been in investors’ good books for a while now on the back of its strategic initiatives, divestitures and cost-reduction efforts.

Over the past 30 days, the company has witnessed its 2021 and 2022 earnings estimates move 0.2% and 0.5% north, respectively.

Shares of this currently Zacks Rank #2 (Buy) company have skyrocketed 69% year to date compared with its industry’s growth of 25.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment ResearchImage Source: Zacks Investment Research

The price performance looks stellar when compared to other stocks in the same space like HCA Healthcare, Inc. (HCA - Free Report) , Universal Health Services, Inc. (UHS - Free Report) and MEDNAX, Inc. (MD - Free Report) , which too have rallied 26.4%, 13.7% and 13.7%, respectively, in the same time frame.

Tenet Healthcare is steadily undertaking strategic divestitures to shed its non-core and unprofitable business units to streamline operations and repay debt. The company’s spin-off of its Conifer business into an independent publicly-traded company is expected to close by the end of 2021. It is likely to reduce its debt burden by using the proceeds generated from this transaction.

This hospital company’s restructuring initiatives lowered its costs to a great extent. The cost-management program comprised primarily of headcount reductions and the renegotiation of contracts with suppliers and vendors.

Its  United Surgical Partners International (USPI) business line performed well in the first quarter of 2021 on the back of operational excellence and a strong pipeline.

Its robust guidance also impresses. After the March-quarter results, it expects net income in the band of $2.98-$4.69 per share, up from the previous guidance of $2.09-$3.81. Net operating revenues are expected in the range of $19.4-$19.8 billion, up from the past guidance of $19.2-$19.6 billion. The midpoint is higher than 2020’s reported revenues by 32.4%. Adjusted EBITDA is expected from $3 billion to $3.2 billion, up from the previous expected range of $2.9-$3.1 billion.

Management expects its EPS within $4.12-$5.46, up from the earlier projection of $3.52-$4.81. This should instill investors’ confidence in the stock.

Although volumes are yet to return to the pre-pandemic levels, the same is slowly recovering. In the first quarter of 2021, net operating revenues of $4.8 billion increased 5.8% year over year on the back of solid contributions from Hospital operations and Ambulatory segments.

Further Upside Left?

We believe that the company is well-poised for growth on the back of various strategic actions.

The stock carries an impressive  VGM Score  of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.  

The Zacks Consensus Estimate for the company’s 2021 earnings indicates an improvement of 11.2% from the year-ago reported figure.

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