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Tenet Healthcare (THC) Q2 Earnings Beat on Solid Hospital Unit
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Tenet Healthcare Corporation (THC - Free Report) reported second-quarter 2023 adjusted earnings of $1.44 per share, which beat the Zacks Consensus Estimate by 14.3% and surpassed management’s expectations. However, the bottom line decreased 2.7% year over year.
Net operating revenues of THC amounted to $5,082 million, which improved 9.6% year over year in the quarter under review and exceeded the management’s estimate. The top line outpaced the consensus mark by 3.7%.
The quarterly results were aided by expanding patient volumes, which led to strong revenue growth in the Ambulatory Care and Hospital segments. Though the growth pace of contract labor costs moderated a bit, a rise in overall expenses of Tenet Healthcare partly offset the upside.
Tenet Healthcare Corporation Price, Consensus and EPS Surprise
Adjusted net income from continuing operations of $154 million fell 4.3% year over year in the second quarter and outperformed management’s expectations. The figure came higher than our estimate of $128.4 million.
Adjusted EBITDA remained flat year over year at $843 million. Adjusted EBITDA, excluding grant income, advanced 11.5% year over year to $835 million.
Operating expenses of $4,540 million escalated 7.3% year over year in the quarter under review and came higher than our estimate of $4,363.6 million. The increase was due to elevated salaries, wages and benefits coupled with higher supplies and other operating expenses.
Segmental Details
Hospital Operations and Other – The segment’s net operating revenues rose 7.6% year over year to $3,922 million in the second quarter, higher than our estimate of $3,747.9 million. Higher adjusted admissions and improved pricing yield contributed to the unit’s results.
On a same-hospital basis, net patient service revenues of $3,590 million improved 7.4% year over year.
Adjusted EBITDA tumbled 10% year over year to $388 million in the quarter under review but outpaced our estimate of $345.4 million, Adjusted EBITDA, excluding grant income, grew 12.4% year over year.
Ambulatory Care – The segment reported net operating revenues of $942 million, which climbed 22.2% year over year in the second quarter and surpassed our estimate of $889.1 million. The business benefited on the back of robust growth in same-facility net surgical cases, buyouts and inauguration of facilities, expansion of service line and improved pricing yield.
Adjusted EBITDA of $370 million advanced 16% year over year in the quarter under review and beat our estimate of $362.4 million. Adjusted EBITDA, excluding grant income, improved 16.4% year over year, thanks to prudent cost-cutting efforts.
Conifer – Net operating revenues totaled $323 million, which slid 3% year over year in the second quarter and fell short of our estimate of $328.7 million. The prior announced contract changes with Tenet Healthcare's hospitals gave a blow to the segment’s quarterly results.
Adjusted EBITDA slipped 8.6% year over year to $85 million but outpaced our estimate of $81.8 million.
Financial Position (as of Jun 30, 2023)
Tenet Healthcare exited the second quarter with cash and cash equivalents of $934 million, which advanced 8.9% from the figure at 2022 end. Total assets of $27,157 million inched up marginally from 2022-end level.
Long-term debt, net of the current portion, amounted to $14,907 million. The figure inched up marginally from the figure as of Dec 31, 2022. Short-term debt totaled $141 million.
THC had no outstanding borrowings under its $1.5 billion line of credit at the June-quarter end.
Total shareholders’ equity of $1,343 million improved 17.6% from the figure at 2022 end.
In the first half of 2023, net cash provided by operating activities increased three-fold from the prior-year comparable period to $1,047 million. Free cash flows were recorded at $466 million in the quarter under review.
Share Repurchase Update
THC bought back common shares worth $40 million in the second quarter.
3Q23 Guidance
Net operating revenues are forecast between $4,900 million and $5,100 million.
Adjusted EBITDA is anticipated between $775 million and $825 million.
Adjusted net income from continuing operations is projected between $100 million and $135 million.
Adjusted earnings per share (EPS) is estimated between 94 cents and $1.28.
2023 Guidance
Concurrent with the second-quarter results, THC updated its 2023 guidance with respect to certain metrics.
Net operating revenues are currently forecasted to lie between $20,100 million and $20,500 million this year, higher from the earlier view of $19,800-$20,200 million. The midpoint of the revised guidance suggests 5.9% growth from the 2022 reported figure.
Net operating revenues of the Hospital segment are presently anticipated within $15,540 million and $15,790 million. The same at the Ambulatory Care and Conifer units are likely to stay between $3,725 million and $3,825 million, and $1,285 million and $1,335 million, respectively.
Adjusted EBITDA is forecasted within $3,310-$3,460 million, up from the previous guidance of $3,210-$3,410 million. Adjusted EBITDA margin is now expected in the 16.5-16.9% band, compared with the prior range of 16.2-16.9%.
Adjusted net income from continuing operations is projected to lie between $550 million and $640 million this year, compared with the earlier view of $530-$655 million. The midpoint of the revised outlook implies a decline of 20% from the 2022 reported figure.
Adjusted EPS is anticipated to be within $5.18-$6.03 for 2023, compared with the prior outlook of $4.92-$6.09. The midpoint of the revised guidance hints at a 17.6% plunge from the 2022 figure.
Net cash provided by operating activities is currently forecasted to lie between $1,775 million and $2,075 million, higher than the earlier guidance of $1,725-$2,025 million.
Free cash flow continues to be expected within $1,100 million and $1,350 million in 2023. Capital expenditures is currently projected between $675 million and $725 million.
Of the Medical sector players that have reported second-quarter 2023 results so far, the bottom-line results of Elevance Health, Inc. (ELV - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Abbott Laboratories (ABT - Free Report) beat the Zacks Consensus Estimate.
Elevance Health reported second-quarter 2023 adjusted net income of $9.04 per share, which outpaced the Zacks Consensus Estimate by 2.5%. The bottom line improved 13.4% year over year. ELV’s operating revenues, which amounted to $43,377 million, rose 12.7% year over year in the quarter under review. The top line surpassed the consensus mark by 4.5%. Medical membership of Elevance Health totaled around 48 million as of Jun 30, 2023, which increased 2% year over year in the second quarter. Overall premiums grew 10.6% year over year to $36,589 million in the quarter under review.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, which beat the Zacks Consensus Estimate of $1.32 by 7.6%. The bottom line improved 24.6% year over year. ISRG reported revenues of $1.76 billion, up 15.4% from the prior-year quarter’s number. On a constant currency basis, revenues were up 17% year over year. The top line beat the consensus estimate by 1.4%. Adjusted operating income totaled $617.6 million, up 16.3% year over year. Revenues at the Instruments & Accessories segment totaled $1.08 billion, indicating a year-over-year improvement of 20.2%.
Abbott Laboratories reported second-quarter 2023 adjusted earnings of $1.08 per share, which topped the Zacks Consensus Estimate by 3.8%. However, the adjusted figure declined from the prior-year quarter’s levels by 24.5%. Second-quarter worldwide sales of $9.98 billion were down 11.4% year over year on a reported basis. The top line exceeded the consensus estimate by 2.9%. ABT reported an adjusted operating profit of $2.04 billion in the quarter under review, down 29.2% year over year. Also, the adjusted operating margin contracted 517 bps to 20.4%. Established Pharmaceuticals segment’s product sales increased 5.2% on a reported basis (up 12.6% on an organic basis) to $1.29 billion.
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Tenet Healthcare (THC) Q2 Earnings Beat on Solid Hospital Unit
Tenet Healthcare Corporation (THC - Free Report) reported second-quarter 2023 adjusted earnings of $1.44 per share, which beat the Zacks Consensus Estimate by 14.3% and surpassed management’s expectations. However, the bottom line decreased 2.7% year over year.
Net operating revenues of THC amounted to $5,082 million, which improved 9.6% year over year in the quarter under review and exceeded the management’s estimate. The top line outpaced the consensus mark by 3.7%.
The quarterly results were aided by expanding patient volumes, which led to strong revenue growth in the Ambulatory Care and Hospital segments. Though the growth pace of contract labor costs moderated a bit, a rise in overall expenses of Tenet Healthcare partly offset the upside.
Tenet Healthcare Corporation Price, Consensus and EPS Surprise
Tenet Healthcare Corporation price-consensus-eps-surprise-chart | Tenet Healthcare Corporation Quote
Q2 Performance
Adjusted net income from continuing operations of $154 million fell 4.3% year over year in the second quarter and outperformed management’s expectations. The figure came higher than our estimate of $128.4 million.
Adjusted EBITDA remained flat year over year at $843 million. Adjusted EBITDA, excluding grant income, advanced 11.5% year over year to $835 million.
Operating expenses of $4,540 million escalated 7.3% year over year in the quarter under review and came higher than our estimate of $4,363.6 million. The increase was due to elevated salaries, wages and benefits coupled with higher supplies and other operating expenses.
Segmental Details
Hospital Operations and Other – The segment’s net operating revenues rose 7.6% year over year to $3,922 million in the second quarter, higher than our estimate of $3,747.9 million. Higher adjusted admissions and improved pricing yield contributed to the unit’s results.
On a same-hospital basis, net patient service revenues of $3,590 million improved 7.4% year over year.
Adjusted EBITDA tumbled 10% year over year to $388 million in the quarter under review but outpaced our estimate of $345.4 million, Adjusted EBITDA, excluding grant income, grew 12.4% year over year.
Ambulatory Care – The segment reported net operating revenues of $942 million, which climbed 22.2% year over year in the second quarter and surpassed our estimate of $889.1 million. The business benefited on the back of robust growth in same-facility net surgical cases, buyouts and inauguration of facilities, expansion of service line and improved pricing yield.
Adjusted EBITDA of $370 million advanced 16% year over year in the quarter under review and beat our estimate of $362.4 million. Adjusted EBITDA, excluding grant income, improved 16.4% year over year, thanks to prudent cost-cutting efforts.
Conifer – Net operating revenues totaled $323 million, which slid 3% year over year in the second quarter and fell short of our estimate of $328.7 million. The prior announced contract changes with Tenet Healthcare's hospitals gave a blow to the segment’s quarterly results.
Adjusted EBITDA slipped 8.6% year over year to $85 million but outpaced our estimate of $81.8 million.
Financial Position (as of Jun 30, 2023)
Tenet Healthcare exited the second quarter with cash and cash equivalents of $934 million, which advanced 8.9% from the figure at 2022 end. Total assets of $27,157 million inched up marginally from 2022-end level.
Long-term debt, net of the current portion, amounted to $14,907 million. The figure inched up marginally from the figure as of Dec 31, 2022. Short-term debt totaled $141 million.
THC had no outstanding borrowings under its $1.5 billion line of credit at the June-quarter end.
Total shareholders’ equity of $1,343 million improved 17.6% from the figure at 2022 end.
In the first half of 2023, net cash provided by operating activities increased three-fold from the prior-year comparable period to $1,047 million. Free cash flows were recorded at $466 million in the quarter under review.
Share Repurchase Update
THC bought back common shares worth $40 million in the second quarter.
3Q23 Guidance
Net operating revenues are forecast between $4,900 million and $5,100 million.
Adjusted EBITDA is anticipated between $775 million and $825 million.
Adjusted net income from continuing operations is projected between $100 million and $135 million.
Adjusted earnings per share (EPS) is estimated between 94 cents and $1.28.
2023 Guidance
Concurrent with the second-quarter results, THC updated its 2023 guidance with respect to certain metrics.
Net operating revenues are currently forecasted to lie between $20,100 million and $20,500 million this year, higher from the earlier view of $19,800-$20,200 million. The midpoint of the revised guidance suggests 5.9% growth from the 2022 reported figure.
Net operating revenues of the Hospital segment are presently anticipated within $15,540 million and $15,790 million. The same at the Ambulatory Care and Conifer units are likely to stay between $3,725 million and $3,825 million, and $1,285 million and $1,335 million, respectively.
Adjusted EBITDA is forecasted within $3,310-$3,460 million, up from the previous guidance of $3,210-$3,410 million. Adjusted EBITDA margin is now expected in the 16.5-16.9% band, compared with the prior range of 16.2-16.9%.
Adjusted net income from continuing operations is projected to lie between $550 million and $640 million this year, compared with the earlier view of $530-$655 million. The midpoint of the revised outlook implies a decline of 20% from the 2022 reported figure.
Adjusted EPS is anticipated to be within $5.18-$6.03 for 2023, compared with the prior outlook of $4.92-$6.09. The midpoint of the revised guidance hints at a 17.6% plunge from the 2022 figure.
Net cash provided by operating activities is currently forecasted to lie between $1,775 million and $2,075 million, higher than the earlier guidance of $1,725-$2,025 million.
Free cash flow continues to be expected within $1,100 million and $1,350 million in 2023. Capital expenditures is currently projected between $675 million and $725 million.
Zacks Rank
Tenet Healthcare currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported second-quarter 2023 results so far, the bottom-line results of Elevance Health, Inc. (ELV - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Abbott Laboratories (ABT - Free Report) beat the Zacks Consensus Estimate.
Elevance Health reported second-quarter 2023 adjusted net income of $9.04 per share, which outpaced the Zacks Consensus Estimate by 2.5%. The bottom line improved 13.4% year over year. ELV’s operating revenues, which amounted to $43,377 million, rose 12.7% year over year in the quarter under review. The top line surpassed the consensus mark by 4.5%. Medical membership of Elevance Health totaled around 48 million as of Jun 30, 2023, which increased 2% year over year in the second quarter. Overall premiums grew 10.6% year over year to $36,589 million in the quarter under review.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, which beat the Zacks Consensus Estimate of $1.32 by 7.6%. The bottom line improved 24.6% year over year. ISRG reported revenues of $1.76 billion, up 15.4% from the prior-year quarter’s number. On a constant currency basis, revenues were up 17% year over year. The top line beat the consensus estimate by 1.4%. Adjusted operating income totaled $617.6 million, up 16.3% year over year. Revenues at the Instruments & Accessories segment totaled $1.08 billion, indicating a year-over-year improvement of 20.2%.
Abbott Laboratories reported second-quarter 2023 adjusted earnings of $1.08 per share, which topped the Zacks Consensus Estimate by 3.8%. However, the adjusted figure declined from the prior-year quarter’s levels by 24.5%. Second-quarter worldwide sales of $9.98 billion were down 11.4% year over year on a reported basis. The top line exceeded the consensus estimate by 2.9%. ABT reported an adjusted operating profit of $2.04 billion in the quarter under review, down 29.2% year over year. Also, the adjusted operating margin contracted 517 bps to 20.4%. Established Pharmaceuticals segment’s product sales increased 5.2% on a reported basis (up 12.6% on an organic basis) to $1.29 billion.