Tenet Healthcare Corp. THC is set to report second-quarter 2015 earnings results on Aug 3, 2015. Last quarter, the company posted a positive earnings surprise of 116.13%. Let's see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
In the quarter to be reported, this hospital services provider undertook some initiatives that should contribute positively to earnings. The company collaborated with Baylor Scott & White Health to extend coordinated and integrated care, thereby advancing population health model. Tenet Healthcare also teamed up with Welsh, Carson, Anderson & Stowe to create the leading U.S. short-stay surgery platform.
While the first deal strengthened the company’s operations in Rockwall, Collin and Dallas, the second one bolstered its ability to gain from the increased demand for convenient, cost-efficient outpatient care and thus, enhanced growth and earnings potential.
However, the Centers for Medicare and Medicaid Services’ (CMS) 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 of #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 -8.16%. This is because the Most Accurate estimate stands at 45 cents per share, while the Zacks Consensus Estimate is pegged at 49 cents per share.
Zacks Rank: Tenet Healthcare sports a Zacks Rank #1 (Strong Buy) which increases the predictive power of ESP. However, a -8.16% ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 and 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 +2.24% and a Zacks Rank #2 (Buy).
Myriad Genetics Inc. MYGN has an Earnings ESP of +2.44% and a Zacks Rank #3 (Hold).
Halyard Health, Inc. HYH has an Earnings ESP of +3.70% and a Zacks Rank #3.
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