Tenet Healthcare Corp. THC is set to report first-quarter 2015 earnings results on May 4, 2015. Last quarter, it posted a negative earnings surprise of 14.2%. Let us see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
In the quarter to be reported, this hospital services provider has undertaken a number of initiatives that should contribute positively to earnings. These include extension and expansion of contract with Catholic Health Initiatives (CHI) as well as partnerships with Health Net, Inc. HNT and United Surgical Partners International (USPI). While the contract extension with Catholic Health and alliance with Health Net has boosted the membership base of the company, the collaboration with USPI has enhanced Tenet Healthcare’s ambulatory service.
However, the Centers for Medicare and Medicaid Services’ (CMS) 1% reduction in payments for hospitals is expected to weigh on revenues to some extent. High financial leverage and expenses are other setbacks.
Earnings Whispers
Our proven model does not conclusively show that Tenet Healthcare is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Tenet Healthcare has an ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 31 cents per share.
Zacks Rank: Tenet Healthcare has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks from the health care space which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
HCA Holdings, Inc. HCA has an Earnings ESP of +0.75% and a Zacks Rank #1 (Strong Buy).
RadNet, Inc. RDNT has an Earnings ESP of +20.00% and a Zacks Rank #3.
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