Tenet Healthcare Corporation (THC Quick QuoteTHC - Free Report) is set to beat on earnings for the fourth quarter of 2023, the results for which are scheduled to be released on Feb 8, before the opening bell.

What Do the Estimates Say?

The Zacks Consensus Estimate for fourth-quarter earnings per share of $1.55 suggests a 20.9% decrease from the prior-year figure of $1.96. The consensus mark has remained stable over the past week. The consensus estimate for fourth-quarter revenues of $5.3 billion indicates a 5.2% increase from the year-ago reported figure.

Tenet Healthcare beat estimates in all the trailing four quarters, delivering an average surprise of 27.8%. This is depicted in the graph below.

What the Quantitative Model Suggests

Our proven model predicts a likely earnings beat for Tenet Healthcare this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is precisely the case here.

Earnings ESP: Tenet Healthcare has an Earnings ESP of +13.10%. This is because the Most Accurate Estimate is currently pegged at $1.75 per share, higher than the Zacks Consensus Estimate of $1.55. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Tenet Healthcare currently has a Zacks Rank #3.

Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at THC’s previous-quarter performance first.

Q3 Earnings Rewind

The diversified healthcare services company reported adjusted earnings of $1.44 per share for the previous quarter, beating the Zacks Consensus Estimate by 20%. 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.

Now, let’s see how things have shaped up prior to the fourth-quarter earnings announcement.

Factors Driving Q4 Performance

With seniors resuming elective procedures, which were delayed due to pandemic-related constraints, Tenet Healthcare is expected to have witnessed higher admissions and occupancy rates in the fourth quarter. The Zacks Consensus Estimate and our estimate for adjusted patient admissions in total hospital operations suggest more than 1% year-over-year growth.

On the same hospital basis, the consensus estimate and our model estimate for adjusted patient admissions indicate a 2.6% increase from a year ago. As such, the Zacks Consensus Estimate for hospital operations and other revenues for the fourth quarter indicates 4.4% year-over-year growth, whereas our model estimate suggests a 3.4% increase.

Meanwhile, the Ambulatory Care business is likely to have gained from better patient volumes, new service line growth and higher pricing yield. Our estimate for the Ambulatory Care segment’s operating revenues suggests nearly 9% growth from the prior-year quarter’s figure, whereas the consensus estimate predicts around 11% gain. Higher patient service revenues are likely to have provided a boost in the fourth quarter.

The above-mentioned factors are likely to have benefited THC’s results in the fourth quarter, positioning it for a likely earnings beat. However, contract changes with Tenet Healthcare’s hospitals are expected to have affected its Conifer segment. The consensus estimate for Conifer’s revenues predicts a 1.3% decline year over year, partially offsetting the positives.

Moreover, rising operating costs, a decline in licensed beds and average length of stay are expected to have affected its margins in the fourth quarter, reducing the bottom line. Our estimates for salaries, wages & benefits and supply costs suggest nearly 1% and 7% year-over-year growth, respectively.

Higher expenses are likely to have led to a 5% year-over-year decrease in hospital operation’s adjusted EBITDA in the fourth quarter, per the consensus mark. We expect total licensed beds to have declined more than 2% year over year in the fourth quarter, while average length of stay is likely to have fallen 3.6%. Both the Zacks Consensus Estimate and our model estimate suggest fourth-quarter total hospital patient days to have declined nearly 2% year over year.

Other Stocks That Warrant a Look

Here are some other companies worth considering from the broader Medical space, as our model shows that these, too, have the right combination of elements to beat on earnings this time around:

GoodRx Holdings, Inc. (GDRX Quick QuoteGDRX - Free Report) has an Earnings ESP of +15.91% and is a Zacks #2 Ranked player.

The Zacks Consensus Estimate for GoodRx’s bottom line for the to-be-reported quarter is pegged at 7 cents per share, which has remained stable over the past week. The consensus mark for GDRX’s revenues is pegged at $193.9 million, signaling 5.3% year-over-year growth.

Globus Medical, Inc. (GMED Quick QuoteGMED - Free Report) has an Earnings ESP of +1.85% and a Zacks Rank #3.

The Zacks Consensus Estimate for Globus Medical’s bottom line for the to-be-reported quarter is pegged at 59 cents per share, which has witnessed four upward revisions over the past month against none in the opposite direction. GMED beat earnings estimates in each of the past four quarters, with an average surprise of 5.4%.

Arvinas, Inc. (ARVN Quick QuoteARVN - Free Report) has an Earnings ESP of +17.19% and is a Zacks #1 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Arvinas’ earnings per share for the to-be-reported quarter indicates an 18% year-over-year improvement. ARVN beat earnings estimates in two of the past four quarters and missed on the other occasions.

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