We issued an updated research report on Tenet Healthcare Corp. THC on Jan 11, 2016.
Tenet Healthcare has been undertaking strategic initiatives that are expected to act as a catalyst for the company’s growth. Recently, the company divested its North Carolina hospitals to Duke LifePoint Healthcare. Additionally, the company completed the joint venture with Baylor Scott & White Health. While the divestiture is expected to help the company focus on its core operations and thus boost its operating revenues, the partnership is a clear reflection of the company’s focus on increasing its scale of operation.
Additionally, last month the company extended its partnership with Aetna Inc. AET for four years. The transaction is undoubtedly a significant move by Tenet Healthcare to reach its goal of associating itself with other insurance companies so as to bring superior quality, convenient and affordable choices to its members.
Tenet Healthcare has been witnessing consistent growth in operating revenues over the past few years on account of improvement in the outpatient business. Acquisition of outpatient businesses and the opening of more such facilities have increased the outpatient center count, thereby contributing positively to revenues.
The company also boasts a strong financial position that helps it to deploy capital efficiently and undertake strategic plans. The company has been issuing new debt in order to pay the old debt with higher coupon rate, which has reduced its borrowing costs.
However, increase in the level of uncollectible accounts and doubtful debts raise caution. Moreover, Tenet Healthcare has been experiencing high levels of operating expenses over the past few years.
Increase in information technology service contract expenses related to the HIT implementation program, malpractice expenses, physician relocation costs, hospital provider fees, annual salary hikes and employee benefits further weigh on margins from time to time.
The company is expected to report fourth-quarter 2015 earnings in Feb 2016. The Zacks Consensus Estimate for the same is pegged at 33 cents per share, representing year-over-year decline of 67.96%.
Tenet Healthcare currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks from the health care services space are Magellan Health, Inc. MGLN, and UnitedHealth Group Incorporated UNH. Both stocks sport a Zacks Rank #1 (Strong Buy).
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