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Tenet (THC) Up 16.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Tenet Healthcare (THC - Free Report) . Shares have added about 16.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Tenet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Tenet Healthcare Q4 Earnings Beat Estimates, Surge Y/Y

Tenet Healthcare reported fourth-quarter 2021 adjusted net earnings of $2.70 per share, which surpassed the Zacks Consensus Estimate and rose year over year, both by 73.1%. THC’s results gained from reduced expenses and operational excellence.

Quarterly Operational Update

Net operating revenues dipped 1.2% year over year to $4.8 billion due to weak performances by its Hospital and Conifer segments. The top line missed the Zacks Consensus Estimate by 2.8%.

THC’s adjusted net income from continuing operations plunged 41.9% year over year to $294 million. In the fourth quarter, adjusted EBITDA excluding grant income totaled $877 million, which increased 5.4% from the prior-year quarter’s level.

Operating expenses fell 3.9% year over year to $4.3 billion in the quarter.

Quarterly Segmental Details

Hospital Operations and Other

Net operating revenues (which exclude grant income) from the segment amounted to $3.9 billion, which fell 3.8% year over year. On same-hospital basis, net patient service revenues improved 1.7% year over year to $3.545 billion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) excluding grant income was $440 million, which increased 2.1% year over year.

Ambulatory Care

The Ambulatory Care segment delivered net operating revenues of $742 million in the fourth quarter, which climbed 14.3% year over year.  The segment reported an adjusted EBITDA excluding grant income of $343 million, up 18.3% from the prior-year quarter’s level.

Conifer

Net operating revenues from the segment declined 5.8% year over year to $324 million. Adjusted EBITDA from the segment was $94 million in the quarter under review, down 15.3% year over year.

Financial Position

Tenet Healthcare exited 2021 with cash and cash equivalents of $2.3 billion, which declined 3.4% from the level at 2020 end. During 2021, net cash provided by operating activities declined 54% year over year.

Full-Year Update

THC's adjusted net income from continuing operations for 2021 came in at $7.58, down 4.3% year over year. Revenues for 2021 increased 10.5% from the prior-year quarter’s level.

2022 Guidance

For the current year, net operating revenues are anticipated between $19.5 billion and $19.9 billion, the midpoint indicating an upside of 1.1% from the 2021 reported figure of $19.48 billion.

Adjusted EBITDA is estimated to be $3.375-$3.575 billion, suggesting 6% core growth from 2021’s reported figure.

Adjusted EPS is expected within $5.86-$7.05, the midpoint being down 14.8% from the 2021 reported figure.

The guidance for net cash provided by operations activities ranges from $1.150 billion to $1.450 billion, the midpoint indicating a downside of 17.1% from the 2021 reported figure.

Q122 Outlook

Revenues are expected in the range of $4.6-4.8 billion. Adjusted EPS for the quarter is expected between 92 cents and $1.15.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -21.21% due to these changes.

VGM Scores

At this time, Tenet has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Tenet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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