On Jul 11, Zacks Investment Research upgraded Tenet Healthcare Corp. (THC) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Tent Healthcare has been witnessing rising earnings estimates on the back of a couple of encouraging announcements by the company. These include Tent Healthcare’s acquisition plans, partnerships and geographic expansions. Earlier, the company had reported impressive first-quarter 2014 results that drove bullish sentiment on the stock and upward estimate revision.
Notably, Tenet Healthcare delivered positive earnings surprises in 2 of the last 3 quarters with an average beat of 14.8%. The long-term expected earnings growth rate for this stock is 12.2%
Tent Healthcare has been upfront in strengthening its operations, be it through opening new centers or acquisitions or partnerships. When it comes to expansion strategies, we see immense potential in the company’s launch of MedPost Urgent Care in May 2014. Through this, Tenet Healthcare will cater to the exigencies of healthcare consumers.
With the introduction of MedPost brand, Tenet Healthcare has now opened 23 urgent care centers in 8 states and aims to take the count to 46 by the end of 2014. This forms a part of the company’s broader corporate strategy of providing more services to patients so that it can spread out into faster-growing and less capital intensive businesses.
Moreover, Tenet Healthcare’s acquisition plans position it to generate long-term growth and have boosted investor sentiment as well. In Jun 2014, the company acquired a majority stake in Texas Regional Medical Center at Sunnyvale. Furthermore, last week, the company revealed plans to acquire a number of hospitals, the prime being Saint Mary’s Hospital. Tenet Healthcare already has plans to acquire a majority stake of Waterbury Hospital.
Other hospitals in the nation where Tenet Healthcare has shown interest include Bristol Hospital and Healthcare Group as well as Manchester Memorial Hospital and Rockville General Hospital (together forming the Eastern Connecticut Health Network). With the aforementioned acquisition plans, the company, currently operating in 16 states, intends to expand its network to other states and strengthen its operations in the existing states.
With regard to partnerships, Tenet Healthcare’s alliance with Texas Tech University Health Sciences Center at El Paso in May 2014 to set up a teaching hospital is impressive. Moreover, the ACO agreement with Florida Blue in Jun 2014 and collaboration with Cigna Corp. (CI) in May 2014 are noteworthy for triggering bullish sentiment.
The Zacks Consensus Estimate for 2014 increased 0.8% to $1.28 per share as most of the estimates were revised higher over the last 60 days. For 2015, estimates moved north over the same time frame, lifting the Zacks Consensus Estimate by 2.4% to $2.59 per share.
Other Stocks to Consider
Other players in the industry that look attractive at current levels include Molina Healthcare Inc. (MOH) and Acadia Healthcare Company, Inc. (ACHC), both sporting a Zacks Rank #1 (Strong Buy).
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