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Tenet Healthcare (THC) Down 6.5% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Tenet Healthcare Corporation (THC - Free Report) . Shares have lost about 6.5% in that time frame.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Tenet Healthcare Q1 Earnings & Revenues Miss Estimates
Tenet Healthcare reported first-quarter 2017 operating earnings of $0.27 per share that missed the Zacks Consensus Estimate by 79%. Also, the bottom line deteriorated 40% year over year due to lower revenue generation.
This underperformance was primarily because no revenues were generated by the California Provider Fee program, the sale of Tenet’s hospitals in Atlanta, GA and approximately $7 million in start-up losses in the first quarter.
Tenet Healthcare reported a net loss from continuing operations of $52 million in the first quarter, which narrowed 5.4% year over year. Adjusted EBITDA of $527 million declined 14.6% year over year.
Operational Update
First-quarter net operating revenue came in at $4.8 billion, down 4.6% from the prior-year quarter. Revenues also missed the Zacks Consensus Estimate of by 0.8%.
For the first quarter, Tenet Healthcare’s provision for doubtful accounts increased 1.9% year over year to $383 million due to higher bad debt ratio. The increase in the bad debt ratio mainly stemmed from a $34 million increase in uninsured revenues.
Same-hospital exchange admissions were 5,168, down 1.8% from the year-ago quarter. Same-hospital exchange outpatient visits were 51,008, up 13.9% from the first quarter of 2016.
Total operating expense of $4.6 billion decreased 3% year over year due to a substantial decline in salaries, wages and benefits, supplies and litigation, and investigation costs.
Quarterly Segment Details:
Hospital & Other
Net operating revenue in the Hospital Operations and Other segment decreased 6.4% from the last-year quarter to $4.1 billion. This was mainly because of the divestment of certain hospitals over this period.
Adjusted EBITDA was $309 million, down 26.1% year over year. This was because no revenues were recorded under the California Provider Fee program, the sale of Tenet’s hospitals in Atlanta, GA and approximately $7 million in start-up losses in the first quarter.
Ambulatory Segment:
The Ambulatory segment generated net operating revenue of $455 million, up 6.1% year over year.
In addition, the segment reported adjusted EBITDA (Earnings before Interest, Taxes, Depriciation and Amortization) of $153 million, up 12.5% year over year.
Conifer Segment:
Conifer’s revenues increased 4.4% from the prior-year quarter to $402 million on the back of 11.5% higher revenues generated from third-party customers.
The segment generated $65 million of adjusted EBITDA in the reported quarter, up 3.2% year over year.
Business Update
Tenet and Humana reached a new, multi-year agreement, per which all of Tenet’s hospitals and hospital-affiliated outpatient centers and employed physicians will be phased back into Humana’s network between Jun 1, and Oct 1, 2017.
Tenet and HCA Holdings entered into a definitive agreement for the sale of Tenet’s acute care hospitals and related operations in Houston, TX. The transaction is expected to result in net proceeds of approximately $725 million and is expected to be completed in the third quarter of 2017, subject to customary regulatory approvals and closing conditions.
Financial Position
As of Mar 31, 2017, Tenet Healthcare had cash and cash equivalents of $572 million, down 20.1% from year-end 2016.
The company exited the first quarter with $15.071 billion of long-term debt, up 0.05% from year-end 2016.
As of Mar 31, 2017, shareholders’ equity was $430 million, up 3.1% from Dec 31, 2016.
Net cash provided by operating activities for the three months ended Mar 31, 2017 was $186 million. This is $39 million higher than $147 million recorded in the first quarter of 2016.
2017 Outlook
Tenet Healthcare projects revenues in the range of $19.7–$20.1 billion, adjusted EBITDA of $2.525–$2.625 billion and adjusted earnings per diluted share of $1.05–$1.30.
Tenet Healthcare expects adjusted free cash flow of $600–$800 million.
Net income from continuing operations is estimated in the range of $71–$95 million.
Second-Quarter Outlook
For the second quarter, the company expects revenues in the range of $4.85–$5.05 billion, adjusted EBITDA of $500–$600 million. Net loss from continuing operations is expected between $30 million and 25 million. Adjusted loss per share from continuing operations are expected in the range of a loss of 0.20 to a loss of $0.10.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to six lower. In the past month, the consensus estimate has shifted lower by 138% due to these changes.
At this time, Tenet Healthcare's stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'C'. The stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Tenet Healthcare (THC) Down 6.5% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Tenet Healthcare Corporation (THC - Free Report) . Shares have lost about 6.5% in that time frame.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Tenet Healthcare Q1 Earnings & Revenues Miss Estimates
Tenet Healthcare reported first-quarter 2017 operating earnings of $0.27 per share that missed the Zacks Consensus Estimate by 79%. Also, the bottom line deteriorated 40% year over year due to lower revenue generation.
This underperformance was primarily because no revenues were generated by the California Provider Fee program, the sale of Tenet’s hospitals in Atlanta, GA and approximately $7 million in start-up losses in the first quarter.
Tenet Healthcare reported a net loss from continuing operations of $52 million in the first quarter, which narrowed 5.4% year over year. Adjusted EBITDA of $527 million declined 14.6% year over year.
Operational Update
First-quarter net operating revenue came in at $4.8 billion, down 4.6% from the prior-year quarter. Revenues also missed the Zacks Consensus Estimate of by 0.8%.
For the first quarter, Tenet Healthcare’s provision for doubtful accounts increased 1.9% year over year to $383 million due to higher bad debt ratio. The increase in the bad debt ratio mainly stemmed from a $34 million increase in uninsured revenues.
Same-hospital exchange admissions were 5,168, down 1.8% from the year-ago quarter. Same-hospital exchange outpatient visits were 51,008, up 13.9% from the first quarter of 2016.
Total operating expense of $4.6 billion decreased 3% year over year due to a substantial decline in salaries, wages and benefits, supplies and litigation, and investigation costs.
Quarterly Segment Details:
Hospital & Other
Net operating revenue in the Hospital Operations and Other segment decreased 6.4% from the last-year quarter to $4.1 billion. This was mainly because of the divestment of certain hospitals over this period.
Adjusted EBITDA was $309 million, down 26.1% year over year. This was because no revenues were recorded under the California Provider Fee program, the sale of Tenet’s hospitals in Atlanta, GA and approximately $7 million in start-up losses in the first quarter.
Ambulatory Segment:
The Ambulatory segment generated net operating revenue of $455 million, up 6.1% year over year.
In addition, the segment reported adjusted EBITDA (Earnings before Interest, Taxes, Depriciation and Amortization) of $153 million, up 12.5% year over year.
Conifer Segment:
Conifer’s revenues increased 4.4% from the prior-year quarter to $402 million on the back of 11.5% higher revenues generated from third-party customers.
The segment generated $65 million of adjusted EBITDA in the reported quarter, up 3.2% year over year.
Business Update
Tenet and Humana reached a new, multi-year agreement, per which all of Tenet’s hospitals and hospital-affiliated outpatient centers and employed physicians will be phased back into Humana’s network between Jun 1, and Oct 1, 2017.
Tenet and HCA Holdings entered into a definitive agreement for the sale of Tenet’s acute care hospitals and related operations in Houston, TX. The transaction is expected to result in net proceeds of approximately $725 million and is expected to be completed in the third quarter of 2017, subject to customary regulatory approvals and closing conditions.
Financial Position
As of Mar 31, 2017, Tenet Healthcare had cash and cash equivalents of $572 million, down 20.1% from year-end 2016.
The company exited the first quarter with $15.071 billion of long-term debt, up 0.05% from year-end 2016.
As of Mar 31, 2017, shareholders’ equity was $430 million, up 3.1% from Dec 31, 2016.
Net cash provided by operating activities for the three months ended Mar 31, 2017 was $186 million. This is $39 million higher than $147 million recorded in the first quarter of 2016.
2017 Outlook
Tenet Healthcare projects revenues in the range of $19.7–$20.1 billion, adjusted EBITDA of $2.525–$2.625 billion and adjusted earnings per diluted share of $1.05–$1.30.
Tenet Healthcare expects adjusted free cash flow of $600–$800 million.
Net income from continuing operations is estimated in the range of $71–$95 million.
Second-Quarter Outlook
For the second quarter, the company expects revenues in the range of $4.85–$5.05 billion, adjusted EBITDA of $500–$600 million. Net loss from continuing operations is expected between $30 million and 25 million. Adjusted loss per share from continuing operations are expected in the range of a loss of 0.20 to a loss of $0.10.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to six lower. In the past month, the consensus estimate has shifted lower by 138% due to these changes.
Tenet Healthcare Corporation Price and Consensus
Tenet Healthcare Corporation Price and Consensus | Tenet Healthcare Corporation Quote
VGM Scores
At this time, Tenet Healthcare's stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'C'. The stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.