It has been about a month since the last earnings report for Tenet Healthcare (THC - Free Report) . Shares have added about 1.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Tenet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Tenet Healthcare Q2 Earnings Top & Up Y/Y, Revenues Lag
Tenet Healthcare Corporation delivered second-quarter 2018 adjusted net income of 49 cents per share, outperforming the Zacks Consensus Estimate by 104.2%. The upside is primarily driven by the performance of Ambulatory Segment. Moreover, the bottom line rebounded from the year-ago loss of 17 cents.
Quarterly Operational Update
Net operating revenues came in at $4.5 billion, down 6.2% year over year. Additionally, the top line missed the Zacks Consensus Estimate by 1.6%. This was due to weak performances by the Hospital and other plus Conifer segments.
Tenet Healthcare’s same-hospital exchange admissions were 4,725, down 5.6 % year over year.
Same-hospital exchange outpatient visits were 51,845, up 0.6% year over year.
Quarterly Segment Details
Hospital & Other
Net operating revenues in the Hospital Operations and Other segment came in at $3.7 billion, down 8.6% year over year This downside is largely attributable to hospital divestitures and a decline in health plan business.
On same-hospital basis, patient revenues were $3.4 billion, up 3.2% year over year.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $345 million, down 0.3% year over year.
The Ambulatory segment generated net operating revenues of $531 million, up 12.5% year over year
Additionally, the segment reported adjusted EBITDA of $198 million, up 20.7% year over year.
Conifer’s revenues decreased 3.5% from the prior-year quarter’s level to $386 million. This was mainly due to the company’s divestiture activities.
The segment reported $91 million of adjusted EBITDA in the quarter under review, up 51.7% year over year.
As of Jun 30, 2018, Tenet Healthcare had cash and cash equivalents of $403 million, down 34% from the number at year-end 2017.
The company exited the second quarter with $14.2 billion of long-term debt, down 3.4% from the count at 2017 end.
Net cash provided by operating activities for the first half of 2018 stands at $461 million, up 15% year over year.
Adjusted earnings per share are projected between $1.54 and $1.88, up from the earlier projection of $1.36-$1.70.
Tenet Healthcare retains its expectation for revenues in the range of $17.9-$18.3 billion.
Adjusted EBITDA is reaffirmed between $2.55 billion and $2.65 billion.
Tenet Healthcare reiterates adjusted its free cash flow of $725-$925 million. However, the company has lowered its net cash provided by operating activities from $1.245-$1.550 billion to $1.220-$1.525 billion.
The company now anticipates revenues in the range of $4.3-$4.5 billion, down from the earlier projection of $4.475-$4.675 billion.
The company now envisions adjusted EBITDA between $575 million and $625 million, down from the previous prediction of $605-$655 million.
Adjusted earnings per share from continuing operations are likely to vary between 10 cents and 24 cents, down from the past estimate of 15-29 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -46.5% due to these changes.
At this time, Tenet has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Tenet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.