Tenet Healthcare Corp. THC reported third-quarter 2015 operating earnings of 36 cents per share that beat the Zacks Consensus Estimate by 20%. The bottom line also came in above the year-ago income of 26 cents per share and was within the company-guided range of 5–49 cents.
Including results of both continuing and discontinued operations, Tenet Healthcare’s net loss attributable to common shareholders in the reported quarter was 29 cents per share, comparing unfavorably with the year-ago income of 9 cents.
Decrease in acuity inpatient hospital admissions as well as market volatility led to the deterioration.
Operational Update
Net operating revenue of Tenet Healthcare came in at $4.7 billion beating the Zacks Consensus Estimate of $4.6 billion. Revenues were also up 12.4% from the prior-year quarter and were within the company-guided range of $4.65–$4.85 billion. The improvement was largely attributable to an increase in same-hospital adjusted patient admissions, same-hospital net patient revenue per adjusted patient admission, and higher revenues at Conifer from non-Tenet hospitals. Additionally, acquisitions, joint ventures and newly constructed facilities contributed to the upside.
Tenet Healthcare’s net patient revenue per adjusted admission increased 4.9% year over year to $11,688.
Total admissions increased 1%, while adjusted admissions rose 2.8%, both on a year-over-year basis. Additionally, the area of strategic focus through surgeries improved 2.8% and emergency department visits grew 3.9%.
As a percentage of revenues, bad debt expense ratio was 7.3%, higher than 5.6% in the year-ago quarter.
Tenet Healthcare’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved 23.3% year over year to $566 million in the third quarter. This remained within the company’s projection of $550–$600 million.
Financial Position
As of Sep 30, 2015, Tenet Healthcare had cash and cash equivalents of $450 million, up from $193 million as of Dec 31, 2014. The company exited the third quarter with total assets worth $23.2 billion, up from $18.1 billion as of Dec 31, 2014. Shareholders’ equity as of Sep 30, 2015 was $802 million, higher than $651 as of Dec 31, 2014.
Net cash flow in the first nine months of 2015 was $935 million, significantly higher than $468 million in the year-ago period.
Tenet Healthcare’s capital expenditure decreased to $207 million in the third quarter from $211 million in the year-ago quarter.
Share Repurchase Update
The company’s board of directors has authorized a share repurchase program for up to $500 million. The program is scheduled to expire on Dec 31, 2016.
Guidance
Fourth-Quarter 2015
Adjusted EBITDA for the fourth quarter is expected in the range of $587–$637 million. Tenet Healthcare expects earnings per share for the quarter to be between 7 cents and 41 cents.
Net operating revenues are expected in the $4.74–$4.94 billion range.
2015
Adjusted EBITDA for 2015 is now expected in the range of $2.25–$2.30 billion compared with $2.225–$2.325 billion guided earlier. Earnings per share are expected in the $1.76–$2.11 range compared with the earlier guidance of $1.32–$2.21 per share. The outlook incorporates electronic health record initiatives worth $65 million and equity in earnings of unconsolidated affiliates of nearly $90 million.
Net operating revenue for 2015 is now expected between $18.35 billion and $18.55 billion, up from the earlier guidance of $18.1–$18.5 billion.
Adjusted free cash flow view was upped to $350–$500 million from $225–$425 million.
Performance of Other Stocks in the Healthcare Space
Among other stocks in the health care space, UnitedHealth Group Incorporated UNH, Anthem Inc. ANTM and Aetna Inc. AET surpassed their respective Zacks Consensus Estimates in the third quarter of 2015.
Zacks Rank
Currently, Tenet Healthcare carries a Zacks Rank #3 (Hold).
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