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Tenet Healthcare (THC) Q3 Earnings Beat on Solid Ambulatory Care
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Tenet Healthcare Corporation (THC - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $1.44, which beat the Zacks Consensus Estimate by 20% and surpassed management’s expectations. The bottom line remained flat year over year.
Net operating revenues of THC amounted to $5,066 million, which improved 5.5% year over year in the quarter under review and met the management’s estimate. The top line outpaced the consensus mark by 1%.
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 the overall expenses of Tenet Healthcare partly offset the upside.
Tenet Healthcare Corporation Price, Consensus and EPS Surprise
Adjusted net income from continuing operations of $153 million fell 4.4% year over year in the third quarter and outperformed management’s expectations. The figure came higher than our estimate of $120.8 million.
Adjusted EBITDA increased 1.5% year over year at $854 million. Adjusted EBITDA, excluding grant income, advanced 8.1% year over year to $851 million.
Operating expenses of $4,552 million escalated 5.6% year over year in the quarter under review and came higher than our estimate of $4,491.3 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 3.7% year over year to $3,919 million in the third quarter, higher than our estimate of $3,833.1 million. Higher adjusted admissions and improved pricing yield contributed to the unit’s results.
On a same-hospital basis, net patient service revenues of $3,575 million improved 3.5% year over year.
Adjusted EBITDA tumbled 7.2% year over year to $401 million in the quarter under review but outpaced our estimate of $359.3 million. Adjusted EBITDA, excluding grant income, grew 5.3% year over year.
Ambulatory Care – The segment reported net operating revenues of $941 million, which climbed 16.7% year over year in the third quarter but lagged our estimate of $952.6 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 but lagged our estimate of $373.5 million. Adjusted EBITDA, excluding grant income, improved 16% year over year, thanks to prudent cost-cutting efforts.
Conifer – Net operating revenues totaled $315 million, which slid 5.4% year over year in the third quarter and fell short of our estimate of $336.8 million. The previously announced contract changes with Tenet Healthcare's hospitals gave a blow to the segment’s quarterly results.
Adjusted EBITDA slipped 7.8% year over year to $83 million but outpaced our estimate of $78.9 million.
Financial Position (as of Sep 30, 2023)
Tenet Healthcare exited the third quarter with cash and cash equivalents of $1,054 million, which advanced 22.8% from the figure at 2022-end. Total assets of $27,590 million inched up marginally from the 2022-end level.
Long-term debt, net of the current portion, amounted to $14,901 million. The figure declined 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 third-quarter end.
Total shareholders’ equity of $1,464 million improved 28.2% from the figure at 2022-end.
In the first nine months of 2023, net cash provided by operating activities increased one-fold from the prior-year comparable period to $1.6 billion. Free cash flows were recorded at $1 billion in the first nine months of 2023.
Share Repurchase Update
THC did not buy back any shares in the third quarter of 2023. It had $660 million remaining under authorization, which is expiring on Dec 31, 2024.
Fourth-Quarter Guidance
Net operating revenues are forecasted to be between $5,131 million and $5,331 million.
Adjusted EBITDA is anticipated to be in the range of $836 million-$936 million.
Adjusted net income from continuing operations is projected to be between $119 million and $184 million.
Adjusted EPS is estimated to be between $1.12 and $1.74.
2023 Guidance
Concurrent with the third-quarter results, THC updated its 2023 guidance with respect to certain metrics.
Net operating revenues are currently forecasted to lie between $20,300 million and $20,500 million this year compared with the earlier view of $20,100 -$20,500 million. The midpoint of the revised guidance suggests 6.4% growth from the 2022 reported figure.
Net operating revenues of the Hospital segment are presently anticipated between $15,675 million and $15,795 million. The same at the Ambulatory Care and Conifer units are likely to be between $3,790 million and $3,840 million and $1,270 million and $1,300 million, respectively.
Adjusted EBITDA is forecasted to be in the range of $3,365-$3,465 million, up from the previous guidance of $3,310-$3,460 million. Adjusted EBITDA margin is now expected in the 16.6-16.9% band compared with the prior range of 16.5-16.9%.
Adjusted net income from continuing operations is projected to lie between $580 million and $645 million this year, higher than the earlier view of $550-$640 million. The midpoint of the revised outlook implies a decline of 17.7% from the 2022 reported figure.
Adjusted EPS is anticipated to be within $5.43-$6.05 for 2023 compared with the prior outlook of $5.18-$6.03. The midpoint of the revised guidance hints at a 15.6% plunge from the 2022 figure.
Net cash provided by operating activities is currently forecasted to lie between $1,800 million and $2,075 million compared with the earlier guidance of $1,775-$2,025 million.
Free cash flow continues to be expected between $1,125 million and $1,350 million in 2023. Capital expenditures are currently projected to be in the range of $675 million-$725 million.
Of the Medical sector players that have reported third-quarter 2023 results so far, the bottom-line results of Elevance Health, Inc. (ELV - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) beat the Zacks Consensus Estimate.
Elevance Health reported adjusted net income of $8.99 per share, which outpaced the Zacks Consensus Estimate by 6.4%. The bottom line improved 20.5% year over year. Operating revenues amounted to $42.5 billion, which advanced 7.2% year over year in the quarter under review. Yet, the top line fell short of the consensus mark by a whisker.
UnitedHealth Groupreported third-quarter 2023 adjusted EPS of $6.56, which outpaced the Zacks Consensus Estimate by 3.6%. The bottom line advanced 13.3% year over year. Revenues improved 14.2% year over year to $92.4 billion in the quarter under review, attributable to sound contributions made by the UnitedHealthcare and Optum business lines. The top line surpassed the consensus mark by 1%.
Centenereported third-quarter 2023 EPS of $2, which beat the Zacks Consensus Estimate by 26.6%. The bottom line advanced 53.8% year over year. Revenues of Centene amounted to $38,042 million, which improved 6.1% year over year. The top line outpaced the consensus mark by 5.1%.
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Tenet Healthcare (THC) Q3 Earnings Beat on Solid Ambulatory Care
Tenet Healthcare Corporation (THC - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $1.44, which beat the Zacks Consensus Estimate by 20% and surpassed management’s expectations. The bottom line remained flat year over year.
Net operating revenues of THC amounted to $5,066 million, which improved 5.5% year over year in the quarter under review and met the management’s estimate. The top line outpaced the consensus mark by 1%.
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 the 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
Q3 Performance
Adjusted net income from continuing operations of $153 million fell 4.4% year over year in the third quarter and outperformed management’s expectations. The figure came higher than our estimate of $120.8 million.
Adjusted EBITDA increased 1.5% year over year at $854 million. Adjusted EBITDA, excluding grant income, advanced 8.1% year over year to $851 million.
Operating expenses of $4,552 million escalated 5.6% year over year in the quarter under review and came higher than our estimate of $4,491.3 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 3.7% year over year to $3,919 million in the third quarter, higher than our estimate of $3,833.1 million. Higher adjusted admissions and improved pricing yield contributed to the unit’s results.
On a same-hospital basis, net patient service revenues of $3,575 million improved 3.5% year over year.
Adjusted EBITDA tumbled 7.2% year over year to $401 million in the quarter under review but outpaced our estimate of $359.3 million. Adjusted EBITDA, excluding grant income, grew 5.3% year over year.
Ambulatory Care – The segment reported net operating revenues of $941 million, which climbed 16.7% year over year in the third quarter but lagged our estimate of $952.6 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 but lagged our estimate of $373.5 million. Adjusted EBITDA, excluding grant income, improved 16% year over year, thanks to prudent cost-cutting efforts.
Conifer – Net operating revenues totaled $315 million, which slid 5.4% year over year in the third quarter and fell short of our estimate of $336.8 million. The previously announced contract changes with Tenet Healthcare's hospitals gave a blow to the segment’s quarterly results.
Adjusted EBITDA slipped 7.8% year over year to $83 million but outpaced our estimate of $78.9 million.
Financial Position (as of Sep 30, 2023)
Tenet Healthcare exited the third quarter with cash and cash equivalents of $1,054 million, which advanced 22.8% from the figure at 2022-end. Total assets of $27,590 million inched up marginally from the 2022-end level.
Long-term debt, net of the current portion, amounted to $14,901 million. The figure declined 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 third-quarter end.
Total shareholders’ equity of $1,464 million improved 28.2% from the figure at 2022-end.
In the first nine months of 2023, net cash provided by operating activities increased one-fold from the prior-year comparable period to $1.6 billion. Free cash flows were recorded at $1 billion in the first nine months of 2023.
Share Repurchase Update
THC did not buy back any shares in the third quarter of 2023. It had $660 million remaining under authorization, which is expiring on Dec 31, 2024.
Fourth-Quarter Guidance
Net operating revenues are forecasted to be between $5,131 million and $5,331 million.
Adjusted EBITDA is anticipated to be in the range of $836 million-$936 million.
Adjusted net income from continuing operations is projected to be between $119 million and $184 million.
Adjusted EPS is estimated to be between $1.12 and $1.74.
2023 Guidance
Concurrent with the third-quarter results, THC updated its 2023 guidance with respect to certain metrics.
Net operating revenues are currently forecasted to lie between $20,300 million and $20,500 million this year compared with the earlier view of $20,100 -$20,500 million. The midpoint of the revised guidance suggests 6.4% growth from the 2022 reported figure.
Net operating revenues of the Hospital segment are presently anticipated between $15,675 million and $15,795 million. The same at the Ambulatory Care and Conifer units are likely to be between $3,790 million and $3,840 million and $1,270 million and $1,300 million, respectively.
Adjusted EBITDA is forecasted to be in the range of $3,365-$3,465 million, up from the previous guidance of $3,310-$3,460 million. Adjusted EBITDA margin is now expected in the 16.6-16.9% band compared with the prior range of 16.5-16.9%.
Adjusted net income from continuing operations is projected to lie between $580 million and $645 million this year, higher than the earlier view of $550-$640 million. The midpoint of the revised outlook implies a decline of 17.7% from the 2022 reported figure.
Adjusted EPS is anticipated to be within $5.43-$6.05 for 2023 compared with the prior outlook of $5.18-$6.03. The midpoint of the revised guidance hints at a 15.6% plunge from the 2022 figure.
Net cash provided by operating activities is currently forecasted to lie between $1,800 million and $2,075 million compared with the earlier guidance of $1,775-$2,025 million.
Free cash flow continues to be expected between $1,125 million and $1,350 million in 2023. Capital expenditures are currently projected to be in the range of $675 million-$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 third-quarter 2023 results so far, the bottom-line results of Elevance Health, Inc. (ELV - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) beat the Zacks Consensus Estimate.
Elevance Health reported adjusted net income of $8.99 per share, which outpaced the Zacks Consensus Estimate by 6.4%. The bottom line improved 20.5% year over year. Operating revenues amounted to $42.5 billion, which advanced 7.2% year over year in the quarter under review. Yet, the top line fell short of the consensus mark by a whisker.
UnitedHealth Groupreported third-quarter 2023 adjusted EPS of $6.56, which outpaced the Zacks Consensus Estimate by 3.6%. The bottom line advanced 13.3% year over year. Revenues improved 14.2% year over year to $92.4 billion in the quarter under review, attributable to sound contributions made by the UnitedHealthcare and Optum business lines. The top line surpassed the consensus mark by 1%.
Centenereported third-quarter 2023 EPS of $2, which beat the Zacks Consensus Estimate by 26.6%. The bottom line advanced 53.8% year over year. Revenues of Centene amounted to $38,042 million, which improved 6.1% year over year. The top line outpaced the consensus mark by 5.1%.