It has been about a month since the last earnings report for Tenet Healthcare Corporation (THC - Free Report) . Shares have added about 2.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as 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’s Q2 Loss In Line with Estimate
Tenet Healthcare Corp. reported second-quarter 2017 adjusted net loss from continuing operations attributable to its shareholders of 17 cents per diluted share that met the Zacks Consensus Estimate. The figure compared unfavorably with earnings of 38 cents in the year-ago quarter due to lower revenue generation.
This underperformance primarily stemmed from $55 million decline in California Provider Fee revenues and a $15 million fall in electronic health record incentives.
Second-quarter net operating revenues came in at $4.8 billion, down 1.4% from the prior-year quarter. Revenues also missed the Zacks Consensus Estimate.
Tenet Healthcare’s same-hospital exchange admissions were 5,488 in the second quarter, down 2.2% year over year.
Same-hospital exchange outpatient visits were 58,873 in the quarter, up 10.1% from the year-ago quarter.
Tenet Healthcare’s provision for doubtful accounts was $371 million, representing a ratio of 7.2% of revenues before bad debt compared with $352 million in the prior-year quarter, or 6.7% of revenues before bad debt. The increase in the bad debt ratio was primarily attributable to a $26 million increase in uninsured revenues.
Total operating expenses of $4.5 billion decreased 2.2% year over year due to a substantial decline in litigation and investigation costs.
Quarterly Segment Details:
Hospital & Other
Net operating revenues in the Hospital Operations and Other segment decreased 0.1% from the last-year quarter to $4.1 billion. This was primarily due to a decline in adjusted admissions and the company not being able to record revenues under the California Provider Fee Program in the second quarter.
On a same-hospital basis, patient revenues were $4.036 billion, up 0.4% from second-quarter of 2016.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $346 million, down 19% year over year. This stemmed from $55 million decline in revenues from the California Provider Fee program and a $15 million fall in electronic health record incentives.
The Ambulatory segment generated net operating revenues of $472 million, up 6.8% year over year.
In addition, the segment reported adjusted EBITDA of $164 million, up 18% year over year.
Conifer’s revenues increased 3.6% from the prior-year quarter to $400 million on the back of 11.5% higher revenues generated from third-party customers.
The segment reported $60 million of adjusted EBITDA in the reported quarter, down 4.8% year over year.
As of Jun 30, 2017, Tenet Healthcare had cash and cash equivalents of $475 million, down 34% from year-end 2016.
The company exited the second quarter with $15.012 billion of long-term debt, down 0.3% from year-end 2016.
As of Jun 30, 2017, shareholders’ equity was $373 million, down 11% from Dec 31, 2016.
Net cash provided by operating activities for the six months ended Jun 30, 2017 was $401 million, representing a 31% decline from the first half of 2016.
2017 Outlook Lowered
Tenet Healthcare projects revenues in the range of $19.1 billion to $19.4 billion, down from the previously guided range of $19.7–$20.1 billion.
Adjusted EBITDA is expected between $2.450 billion and $2.550 billion, down from the previous projection of $2.525–$2.625 billion.
Adjusted earnings per diluted share is projected in the range of 69–99 cents, lower from the earlier projection of $1.05–$1.30.
Tenet Healthcare expects adjusted free cash flow of $525–$725 million, down from the prior projection of $600–$800 million. It expects net cash provided by operating activities between $1.2 billion and $1.4 billion.
Net loss from continuing operations is likely to range between $115 million and $90 million, as against the previous guidance of net income of $71–$95 million.
For the third quarter, the company expects revenues in the range of $4.6–$4.8 billion.
It expects adjusted EBITDA to range between $500 million and $550 million.
Net loss from continuing operations is expected between $157 million and $147 million..
Adjusted loss per share from continuing operations is expected between 35 - 20 cents.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been nine revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 1101.7% due to these changes.
At this time, Tenet Healthcare's stock has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
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 are looking for an inline return from the stock in the next few months.