Why Is Tenet (THC) Down 0.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Tenet Healthcare (THC). Shares have lost about 0.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tenet due for a breakout? 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 Q1 Earnings Beat Estimates, Down Y/Y

Tenet Healthcaredelivered first-quarter 2019 adjusted net earnings of 54 cents per share, outperforming the Zacks Consensus Estimate by 80% on the back of operational excellence. However, the bottom line declined 5.3% year over year.

Quarterly Operational Update

Net operating revenues came in at $4.5 billion, down 3.3% year over year due to weak performances by the company’s segments. However, the top line beat the Zacks Consensus Estimate by 0.8%.

Total visits for the company decreased 2% to 169.9 billion in the quarter under review.

Its reported net loss from continuing operations of $27 million came in against the year-ago quarterly net income of $98 million.

Adjusted EBITDA for the first three months of 2019 was $613 million, down 6.4% year over year due to malpractice expense, risk-based contracting business in California, Aspen divestiture and contract termination fees.

Quarterly Segment Details

Hospital & Other

Net operating revenues in the Hospital Operations and Other segment totaled $3.9 billion, down 2.2% year over year. This downside is largely attributable to hospital divestitures, partially offset by same hospital revenue growth.

On same-hospital basis, patient revenues were $3.6 billion, up 1.9% year over year.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $337 million, down 16.2% year over year due to increase in malpractice expenses and losses due to contract losses, etc.

Ambulatory Segment

The Ambulatory segment generated net operating revenues of $480 million, down 3.6% year over year. This was mainly due to the company’s Aspen divestiture.

Additionally, the segment reported adjusted EBITDA of $177 million, up 12% year over year.

Conifer Segment

Conifer’s revenues decreased 13.6% from the prior-year quarter’s level to $349 million. This was mainly due to the company’s divestment activities by Tenet and other customers.

The segment reported $99 million of adjusted EBITDA in the quarter under review, up 1% year over year.

2019 Outlook

The company still expects revenues of $18.0-$18.4 billion.

Net income from continuing operations for 2019 is projected between $17 million and$117 million, up from the earlier estimate of $15-$115 million.

Adjusted EBITDA is still estimated between $2.65 billion and $2.75 billion.

Tenet Healthcare projects adjusted free cash flow of $600-$800 million.

The company expects net cash provided by operating activities of $1.07-$1.375 billion.

Adjusted earnings per share from continuing operations are projected between $2.08 and $2.59.

Second-Quarter 2019 Outlook

The company expects revenues for the second quarter between $4.4 billion and $4.7 billion.

For the secondquarter, net income or loss attributable tocontinuing operations can range from a loss of $5 million to an income of $40 million.

Adjusted EBITDA is expected between $625 million and$675 million.

Adjusted earnings per share are projected between 29 cents to 63 cents.

Financial Position

As of Mar 31, 2019, Tenet Healthcare had cash and cash equivalents of $252 million, down 38.7% from the number at year-end 2018.

The company exited the first quarter with $14.8 billion of long-term debt, up 1.2% from the count at 2018 end.

Net cash provided by operating activities for the first three months of 2019 summed $10 million, down 91.2% from the level at 2018 end level.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.32% due to these changes.

VGM Scores

At this time, Tenet has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.