Zacks Investment Research upgraded shares of Tenet Healthcare Corporation (THC) from NEUTRAL to OUTPERFORM on July 27, 2012, with a target price of $5.25.
We are upgrading our recommendation on Tenet to Outperform based on revenue growth, improved earnings guidance and ratings upgrade. The company's first-quarter earnings surpassed the Zacks Consensus Estimate but lagged the year-ago results. Growth in revenues arising from higher admissions, outpatient visits and surgeries were offset by the rise in operating expenses. Moreover, the company's cash position deteriorated due to high capital expenditure and share buyback. Debt leverage continues to be high, whereas high uncollectibles are the other downsides. Although debt taken to finance the repurchase of convertible preference shares will increase interest expenses, the repurchase will prevent equity dilution. Overall, we believe that growth through the acquisitions and volumes can help boost the future earnings outlook.
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