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Tenet Healthcare (THC) Jumps 14.9% YTD: More Growth Ahead?
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Tenet Healthcare Corporation (THC - Free Report) shares have jumped 14.9% in the year-to-date period despite volatilities, outperforming the 3.8% rise of the industry. Strong Ambulatory Care business, improving staffing trends, admissions and pricing yields are driving the stock.
Headquartered in Dallas, TX, Tenet Healthcare benefits from contractual rate increases in the Conifer unit and outpatient service business growth. It is a diversified healthcare services company, which owns and operates general hospitals and related healthcare facilities in urban and rural communities in numerous states. It currently has a market cap of $5.7 billion.
Image Source: Zacks Investment Research
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you this Zacks Rank #3 (Hold) stock’s estimate picture for 2023.
The Zacks Consensus Estimate for 2023 earnings per share ia pegged at $5.15, which has been unchanged over the past week. THC beat earnings estimates in all the past four quarters, with an average of 65.2%. Also, the consensus mark for 2023 revenues is pegged at $19.9 billion, indicating 3.7% growth from the 2022 reported level.
On the operations front, easing labor contract costs will boost THC’s margins in the coming days. In the fourth quarter, the company was able to lower its contract labor-related costs by 23% sequentially. This indicates that the company’s cost-management program is working and profits will rise in the future.
Improving Ambulatory Care business can play a major role in the company’s growth story. The unit provided 16.6% to the total segmental revenues last year, which can rise on the back of the strong operations of USPI Holding Company. Its aim to strengthen the USPI surgery center business will further trigger margin expansion. Growing service lines and better pricing yield will support the segment.
THC is likely to boost USPI's network, which spans 35 states, by more than 100 centers by 2025-end. This is expected to be achieved through M&A activities, partnerships and joint ventures. Tenet Healthcare has a long inorganic growth story, which boosts the scale of business, operating capacity and geographical presence.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye out for.
Its ROE stands at 32.9X, way lower than the industry's average, reflecting inefficiency in utilizing shareholders' funds. Also, its weak balance sheet, with high debt and low cash, is concerning. Non-controlling interest distributions absorbing a significant portion of operating income is worrisome. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.
The Zacks Consensus Estimate for Avanos Medical’s 2023 earnings predicts 1.8% year-over-year growth. AVNS beat earnings estimates in all the past four quarters, with the average being 11%.
The consensus mark for Viemed’s 2023 earnings indicates an 87.5% year-over-year increase. The consensus estimate for VMD’s revenues in 2023 suggests 15% year-over-year growth.
The Zacks Consensus Estimate for Sera Prognostics’ 2023 earnings witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. SERA beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 7.1%.
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Tenet Healthcare (THC) Jumps 14.9% YTD: More Growth Ahead?
Tenet Healthcare Corporation (THC - Free Report) shares have jumped 14.9% in the year-to-date period despite volatilities, outperforming the 3.8% rise of the industry. Strong Ambulatory Care business, improving staffing trends, admissions and pricing yields are driving the stock.
Headquartered in Dallas, TX, Tenet Healthcare benefits from contractual rate increases in the Conifer unit and outpatient service business growth. It is a diversified healthcare services company, which owns and operates general hospitals and related healthcare facilities in urban and rural communities in numerous states. It currently has a market cap of $5.7 billion.
Image Source: Zacks Investment Research
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you this Zacks Rank #3 (Hold) stock’s estimate picture for 2023.
The Zacks Consensus Estimate for 2023 earnings per share ia pegged at $5.15, which has been unchanged over the past week. THC beat earnings estimates in all the past four quarters, with an average of 65.2%. Also, the consensus mark for 2023 revenues is pegged at $19.9 billion, indicating 3.7% growth from the 2022 reported level.
On the operations front, easing labor contract costs will boost THC’s margins in the coming days. In the fourth quarter, the company was able to lower its contract labor-related costs by 23% sequentially. This indicates that the company’s cost-management program is working and profits will rise in the future.
Improving Ambulatory Care business can play a major role in the company’s growth story. The unit provided 16.6% to the total segmental revenues last year, which can rise on the back of the strong operations of USPI Holding Company. Its aim to strengthen the USPI surgery center business will further trigger margin expansion. Growing service lines and better pricing yield will support the segment.
THC is likely to boost USPI's network, which spans 35 states, by more than 100 centers by 2025-end. This is expected to be achieved through M&A activities, partnerships and joint ventures. Tenet Healthcare has a long inorganic growth story, which boosts the scale of business, operating capacity and geographical presence.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye out for.
Its ROE stands at 32.9X, way lower than the industry's average, reflecting inefficiency in utilizing shareholders' funds. Also, its weak balance sheet, with high debt and low cash, is concerning. Non-controlling interest distributions absorbing a significant portion of operating income is worrisome. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.
Key Picks
Investors interested in the broader medical space may look at better-ranked players like Avanos Medical, Inc. (AVNS - Free Report) , Viemed Healthcare, Inc. (VMD - Free Report) and Sera Prognostics, Inc. (SERA - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Avanos Medical’s 2023 earnings predicts 1.8% year-over-year growth. AVNS beat earnings estimates in all the past four quarters, with the average being 11%.
The consensus mark for Viemed’s 2023 earnings indicates an 87.5% year-over-year increase. The consensus estimate for VMD’s revenues in 2023 suggests 15% year-over-year growth.
The Zacks Consensus Estimate for Sera Prognostics’ 2023 earnings witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. SERA beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 7.1%.