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Can Tenet Healthcare (THC) Keep Earnings Beat Alive in Q2?

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Tenet Healthcare Corporation (THC - Free Report) will report second-quarter 2018 results on Aug 6 after market close.

Tenet Healthcare’s second-quarter performance is likely to drive growth on the back of new key initiatives, cost restructure by the company as well as a solid performance at Conifer segment. Moreover, the United Surgical Partners International should also better the company’s numbers. The Zacks Consensus Estimate for the stock’s earnings stands at 24 cents against the loss of 17 cents suffered in the prior-year quarter.

Let’s see how things are shaping up prior to this announcement.

Factors to be Considered for the Second Quarter

Tenet Healthcare’s Ambulatory segment has been performing well over the past many quarters. The Zacks Consensus Estimate for this segment’s revenues in the second quarter is pegged at $505 million, up 7% year over year.

The company’s top line has been declining over the past few quarters, mainly due to reduced admissions, inpatient and outpatient surgeries, emergency department visits etc. The company would likely face a weak revenue base in the second quarter as well, driven by divestitures and low admissions. The Zacks Consensus Estimate for revenues stands at $4.5 billion, down 4.6% year over year. The consensus mark for adjusted patient admissions in the quarter to be reported is pegged at 0.27 million, down 19.5% year over year.

The company’s cost-reduction initiative, which took place last year, is likely to support its growth. The cost management program comprised headcount reductions and the renegotiation of contracts with suppliers and vendors. This is likely to decrease the company’s expenses and margins.

However, certain expenses related to the expansion of Conifer segment might weigh on its margins.

What the Quantitative Model States

Our proven model conclusively shows that Tenet Healthcare is likely to beat on earnings this to-be-reported quarter. This is because the stock flaunts the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Tenet Healthcare has an Earnings ESP of +7.91%. A positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Tenet Healthcare carries a Zacks Rank #3, which increases the predictive power of ESP. Further with a positive ESP, the stock’s chances of an earnings beat remain significantly high this season.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some other stocks worth considering from the medical sector with the perfect combination of elements to also surpass estimates in the next releases:

Bausch Health Cos Inc. (BHC - Free Report) is scheduled to report second-quarter earnings on Aug 7. The company has an Earnings ESP of +4.94% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canopy Growth Corporation (CGC - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank of 3. The company is set to report second-quarter earnings on Aug 13.

Charles River Laboratories International, Inc. (CRL - Free Report) has an Earnings ESP of +0.68% and is a Zacks #3 Ranked player. The company is expected to report second-quarter earnings on Aug 8.

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