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Tenet Healthcare (THC) Q4 Earnings Beat on Hospital Operations
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Tenet Healthcare Corporation (THC - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of $2.68, which beat the Zacks Consensus Estimate by 69.6% and surpassed management’s expectations. The bottom line jumped 36.7% year over year.
Net operating revenues of THC amounted to $5.4 billion, which improved 7.8% year over year in the quarter under review and met management’s estimate. The top line outpaced the consensus mark by 2.2%.
The strong quarterly results were aided by expanding patient volumes, improving pricing yield and expanding the service line. It witnessed strong operations in both segments. The positives were partly offset by higher supply costs and other operating expenses.
Tenet Healthcare Corporation Price, Consensus and EPS Surprise
Adjusted net income from continuing operations of $283 million rose 32.9% year over year in the fourth quarter and significantly outperformed management and our expectations. Adjusted EBITDA increased 12.8% year over year to more than $1 billion. Adjusted EBITDA, excluding grant income, advanced 17.9% year over year to $851 million.
Coming to operating expenses, salaries, wages and benefits of $2.3 billion escalated 0.4% year over year in the quarter under review but were 0.5% lower than our estimate. Costs related to supplies rose 8.3% year over year to $931 million and were 1.4% higher than our model estimate. Other operating expenses, net, jumped 15.9% to $1.2 billion and were higher than our estimate of $1.1 billion.
Segmental Details
The company has combined its Conifer segment with the Hospital segment and now has two reporting segments: Hospital Operations and Services and Ambulatory Care.
Hospital Operations and Services – The segment’s net operating revenues rose 6% year over year to $4.3 billion in the fourth quarter and beat the Zacks Consensus Estimate by 7.3%. Higher adjusted admissions, improved pricing yield and a favorable payer mix contributed to the unit’s results. On a same-hospital basis, net patient service revenues of $3.7 billion rose from $3.5 billion a year ago.
Adjusted EBITDA rose 11.8% year over year to $548 million in the quarter under review and outpaced the consensus estimate by 44.2%. Adjusted EBITDA margin of 12.7% was higher than the year-ago level of 12.1%.
Ambulatory Care – The segment reported net operating revenues of $1.1 billion, which climbed 15.4% year over year in the fourth quarter and beat our estimate of $1 billion. The business benefited on the back of robust growth in same-facility net surgical cases, buyouts and inauguration of facilities, improved pricing yield and expansion of service line.
Adjusted EBITDA of $464 million advanced 14% year over year in the quarter under review and beat our estimate of $434.1 million. However, the adjusted EBITDA margin of 43.1% was lower than the year-ago level of 43.6%.
Financial Position (as of Dec 31, 2023)
Tenet Healthcare exited the fourth quarter with cash and cash equivalents of $1.2 billion, which advanced from the $858 million figure at 2022-end. Total assets of $28.3 billion inched up from the 2022-end level of $27.2 billion.
Long-term debt, net of the current portion, amounted to $14.9 billion. The figure declined marginally from the amount as of Dec 31, 2022. Current portion of long-term debt totaled $120 million.
Total shareholders’ equity of $1.6 billion improved from the $1.1 billion figure at 2022-end.
In 2023, net cash provided by operating activities increased 119.2% from the prior-year comparable period to $2.4 billion. Free cash flows were recorded at $1.6 billion in 2023, up from $321 million in 2022.
Share Repurchase Update
THC bought back $110 million worth of shares in the fourth quarter of 2023. It had $550 million remaining under authorization, which is expiring on Dec 31, 2024.
First-Quarter Guidance
Net operating revenues are forecasted to be between $5-$5.2 billion. Adjusted EBITDA is anticipated to be in the range of $800-$850 million, while adjusted EBITDA margin is expected at 16-16.3%. Adjusted net income from continuing operations is projected to be between $130 million and $170 million. Adjusted EPS is estimated to be between $1.24 and $1.62. It expects weighted average diluted common shares to be around 105 million.
2024 Guidance
Net operating revenues are currently forecasted to be between $19.9 billion and $20.3 billion in 2024 compared with the 2023 level of $20.5 billion. Net operating revenues of the Hospital segment are presently anticipated between $15.825 billion and $16.075 billion. The same at the Ambulatory Care unit are likely to be between $4.075 billion and $4.225 billion.
Overall adjusted EBITDA is forecasted to be in the range of $3.285 to $3.485 billion, down from the 2023 level of $3.541 billion. Adjusted EBITDA margin is expected in the 16.5-17.2% band compared with the 2023 figure of 17.2%. Adjusted net income from continuing operations is projected to lie between $605 million and $725 million this year, lower than the $744 million level in 2023. Adjusted EPS is anticipated to be within $5.76-$6.90 for 2024 compared with the year-ago level of $6.98.
Adjusted net cash provided by operating activities is currently forecasted to be between $1.725 billion and $2.025 billion compared with the 2023 level of $2.528 billion. Adjusted free cash flow is expected between $950 million and $1.150 billion in 2024, compared with $1.777 billion in 2023. Capital expenditures are currently projected to be in the range of $775-$875 million compared with $751 million in 2023.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS has witnessed one upward estimate revision over the past 60 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2024 full-year earnings implies a 1.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $143.6 billion. CNC beat earnings estimates in three of the last four quarters and missed once, with an average surprise of 7.1%.
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Tenet Healthcare (THC) Q4 Earnings Beat on Hospital Operations
Tenet Healthcare Corporation (THC - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of $2.68, which beat the Zacks Consensus Estimate by 69.6% and surpassed management’s expectations. The bottom line jumped 36.7% year over year.
Net operating revenues of THC amounted to $5.4 billion, which improved 7.8% year over year in the quarter under review and met management’s estimate. The top line outpaced the consensus mark by 2.2%.
The strong quarterly results were aided by expanding patient volumes, improving pricing yield and expanding the service line. It witnessed strong operations in both segments. The positives were partly offset by higher supply costs and other operating expenses.
Tenet Healthcare Corporation Price, Consensus and EPS Surprise
Tenet Healthcare Corporation price-consensus-eps-surprise-chart | Tenet Healthcare Corporation Quote
Q4 Performance
Adjusted net income from continuing operations of $283 million rose 32.9% year over year in the fourth quarter and significantly outperformed management and our expectations. Adjusted EBITDA increased 12.8% year over year to more than $1 billion. Adjusted EBITDA, excluding grant income, advanced 17.9% year over year to $851 million.
Coming to operating expenses, salaries, wages and benefits of $2.3 billion escalated 0.4% year over year in the quarter under review but were 0.5% lower than our estimate. Costs related to supplies rose 8.3% year over year to $931 million and were 1.4% higher than our model estimate. Other operating expenses, net, jumped 15.9% to $1.2 billion and were higher than our estimate of $1.1 billion.
Segmental Details
The company has combined its Conifer segment with the Hospital segment and now has two reporting segments: Hospital Operations and Services and Ambulatory Care.
Hospital Operations and Services – The segment’s net operating revenues rose 6% year over year to $4.3 billion in the fourth quarter and beat the Zacks Consensus Estimate by 7.3%. Higher adjusted admissions, improved pricing yield and a favorable payer mix contributed to the unit’s results. On a same-hospital basis, net patient service revenues of $3.7 billion rose from $3.5 billion a year ago.
Adjusted EBITDA rose 11.8% year over year to $548 million in the quarter under review and outpaced the consensus estimate by 44.2%. Adjusted EBITDA margin of 12.7% was higher than the year-ago level of 12.1%.
Ambulatory Care – The segment reported net operating revenues of $1.1 billion, which climbed 15.4% year over year in the fourth quarter and beat our estimate of $1 billion. The business benefited on the back of robust growth in same-facility net surgical cases, buyouts and inauguration of facilities, improved pricing yield and expansion of service line.
Adjusted EBITDA of $464 million advanced 14% year over year in the quarter under review and beat our estimate of $434.1 million. However, the adjusted EBITDA margin of 43.1% was lower than the year-ago level of 43.6%.
Financial Position (as of Dec 31, 2023)
Tenet Healthcare exited the fourth quarter with cash and cash equivalents of $1.2 billion, which advanced from the $858 million figure at 2022-end. Total assets of $28.3 billion inched up from the 2022-end level of $27.2 billion.
Long-term debt, net of the current portion, amounted to $14.9 billion. The figure declined marginally from the amount as of Dec 31, 2022. Current portion of long-term debt totaled $120 million.
Total shareholders’ equity of $1.6 billion improved from the $1.1 billion figure at 2022-end.
In 2023, net cash provided by operating activities increased 119.2% from the prior-year comparable period to $2.4 billion. Free cash flows were recorded at $1.6 billion in 2023, up from $321 million in 2022.
Share Repurchase Update
THC bought back $110 million worth of shares in the fourth quarter of 2023. It had $550 million remaining under authorization, which is expiring on Dec 31, 2024.
First-Quarter Guidance
Net operating revenues are forecasted to be between $5-$5.2 billion. Adjusted EBITDA is anticipated to be in the range of $800-$850 million, while adjusted EBITDA margin is expected at 16-16.3%. Adjusted net income from continuing operations is projected to be between $130 million and $170 million. Adjusted EPS is estimated to be between $1.24 and $1.62. It expects weighted average diluted common shares to be around 105 million.
2024 Guidance
Net operating revenues are currently forecasted to be between $19.9 billion and $20.3 billion in 2024 compared with the 2023 level of $20.5 billion. Net operating revenues of the Hospital segment are presently anticipated between $15.825 billion and $16.075 billion. The same at the Ambulatory Care unit are likely to be between $4.075 billion and $4.225 billion.
Overall adjusted EBITDA is forecasted to be in the range of $3.285 to $3.485 billion, down from the 2023 level of $3.541 billion. Adjusted EBITDA margin is expected in the 16.5-17.2% band compared with the 2023 figure of 17.2%. Adjusted net income from continuing operations is projected to lie between $605 million and $725 million this year, lower than the $744 million level in 2023. Adjusted EPS is anticipated to be within $5.76-$6.90 for 2024 compared with the year-ago level of $6.98.
Adjusted net cash provided by operating activities is currently forecasted to be between $1.725 billion and $2.025 billion compared with the 2023 level of $2.528 billion. Adjusted free cash flow is expected between $950 million and $1.150 billion in 2024, compared with $1.777 billion in 2023. Capital expenditures are currently projected to be in the range of $775-$875 million compared with $751 million in 2023.
Zacks Rank & Key Picks
Tenet Healthcare currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Medical space are Motus GI Holdings, Inc. (MOTS - Free Report) , Brookdale Senior Living Inc. (BKD - Free Report) and Centene Corporation (CNC - 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 Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS has witnessed one upward estimate revision over the past 60 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2024 full-year earnings implies a 1.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $143.6 billion. CNC beat earnings estimates in three of the last four quarters and missed once, with an average surprise of 7.1%.