Core Viewpoint - Tenet Healthcare (THC) has been upgraded to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2] Earnings Estimates and Stock Price Movement - Changes in a company's future earnings potential, reflected in earnings estimate revisions, are strongly correlated with near-term stock price movements [3] - Institutional investors utilize earnings estimates to calculate the fair value of a company's shares, leading to stock price movements based on their buying or selling activities [3] Tenet's Earnings Outlook - The rising earnings estimates for Tenet indicate an improvement in the company's underlying business, which is expected to positively influence its stock price [4] - Analysts have raised their earnings estimates for Tenet, with the Zacks Consensus Estimate increasing by 7.3% over the past three months [7] Zacks Rank System - The Zacks Rank stock-rating system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have generated an average annual return of +25% since 1988 [6] - The upgrade of Tenet to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [9]

Company Overview - Tenet Healthcare (THC) is expected to report a year-over-year decline in earnings and revenues for the quarter ended March 2025, with earnings projected at $3.12 per share, down 3.1%, and revenues at $5.17 billion, down 3.7% [3][4] - The earnings report is scheduled for release on April 29, 2025, and actual results that exceed expectations could lead to a stock price increase, while a miss could result in a decline [2][3] Earnings Estimates and Trends - The consensus EPS estimate has been revised 0.22% lower in the last 30 days, indicating a reassessment by analysts [4] - The Most Accurate Estimate for Tenet is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +0.72%, suggesting a likelihood of beating the consensus EPS estimate [10][11] Earnings Surprise History - Tenet has a history of exceeding consensus EPS estimates, having beaten expectations in the last four quarters, including a +17.41% surprise in the most recent quarter [12][13] Industry Context - In comparison, Universal Health Services (UHS), another player in the medical-hospital industry, is expected to post earnings of $4.36 per share, reflecting a year-over-year increase of +17.8%, with revenues projected at $4.14 billion, up 7.8% [17] - UHS has seen a 0.7% upward revision in its EPS estimate over the last 30 days, but currently has a negative Earnings ESP of -0.83%, making it difficult to predict a beat despite a Zacks Rank of 1 (Strong Buy) [18]

Group 1 - Tenet Healthcare Corporation (THC) is experiencing significant activity in the options market, particularly with the May 16, 2025 $80.00 Call showing high implied volatility, indicating potential for a major price movement [1] - Implied volatility reflects market expectations for future stock movement, suggesting that investors anticipate a significant event that could lead to a rally or sell-off [2] - Analysts have mixed views on Tenet Healthcare, with three increasing their earnings estimates for the current quarter from $2.96 to $3.12 per share, while two have decreased their estimates [3] Group 2 - The high implied volatility surrounding Tenet Healthcare may indicate a developing trading opportunity, as options traders often seek to sell premium on such options to capture decay [4]

Core Viewpoint - Tenet Healthcare Corporation (THC) has shown significant stock performance, with a 26.9% increase over the past year, outperforming the industry and broader market indices [1] Financial Performance - Tenet Healthcare's market capitalization stands at $12.7 billion, with a closing stock price of $133.04 [1] - The company generated $1.1 billion in free cash flow over the trailing 12 months, with a price-to-free cash flow ratio of 11.43X, lower than the medical sector average of 21.57X, indicating strong financial stability [5] - Tenet Healthcare ended the fourth quarter with $3 billion in cash and cash equivalents, more than double its year-end 2023 balance, while long-term debt decreased by 12.1% to $13.1 billion [6] - The net debt-to-EBITDA ratio improved to 2.61X, significantly below its five-year median of 4.64X and the industry average of 3.29X [7] Growth Drivers - The company is focusing on expanding its ambulatory surgery centers through collaboration with United Surgical Partners International (USPI), which operates 518 ASCs and 25 surgical hospitals across 37 states [3] - Investments in AI-driven technologies aim to enhance clinical and administrative processes, reduce costs, and improve patient satisfaction [4] Valuation - Tenet Healthcare's forward price-to-earnings ratio is 10.72X, lower than its five-year median of 11.94X and the industry average of 12.34X, indicating it is relatively undervalued compared to peers [8] Earnings Estimates - The Zacks Consensus Estimate for 2025 adjusted earnings is $12.15 per share, with upward revisions in the past 30 days, and a projected 10.5% growth for 2026 [11]

Company Performance - Tenet Healthcare (THC) ended the recent trading session at $133.04, showing a +1.73% change from the previous day's closing price, outperforming the S&P 500's daily loss of 1.12% [1] - The stock has decreased by 2.82% over the past month, contributing to the Medical sector's loss of 2.99% and the S&P 500's loss of 2.91% [1] Earnings Forecast - The upcoming earnings report for Tenet Healthcare is anticipated to show an EPS of $3.11, reflecting a 3.42% decline compared to the same quarter last year [2] - The Zacks Consensus Estimate for revenue is projected at $5.17 billion, down 3.71% from the year-ago period [2] Annual Estimates - For the entire year, the Zacks Consensus Estimates forecast earnings of $12.12 per share and revenue of $20.84 billion, indicating changes of +2.02% and +0.85%, respectively, compared to the previous year [3] - Recent changes to analyst estimates for Tenet Healthcare indicate the dynamic nature of near-term business trends, with positive revisions suggesting analyst optimism regarding the company's business and profitability [3] Zacks Rank and Performance - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has shown that 1 stocks have generated an average annual return of +25% since 1988 [5] - Currently, Tenet Healthcare holds a Zacks Rank of 3 (Hold), with a 0.61% decline in the Zacks Consensus EPS estimate over the past month [5] Valuation Metrics - Tenet Healthcare's Forward P/E ratio is 10.8, which is a premium compared to the industry's average Forward P/E of 10.45 [6] - The company has a PEG ratio of 0.98, which is lower than the industry average PEG ratio of 1.07 [6] Industry Overview - The Medical - Hospital industry, part of the Medical sector, has a Zacks Industry Rank of 81, placing it in the top 33% of over 250 industries [7] - The Zacks Industry Rank measures the strength of industry groups by evaluating the average Zacks Rank of individual stocks, with top-rated industries outperforming the bottom half by a factor of 2 to 1 [7]

Group 1 - Healthcare stocks are currently facing significant challenges, with many testing new 52-week lows [1] - Speculation regarding potential Medicaid cuts is exacerbating the difficulties within the healthcare sector [1] Group 2 - The article reflects a broader concern about the state of healthcare investments and the potential for undervalued opportunities [1]

Valuation and Financial Performance - Tenet Healthcare Corporation (THC) is currently trading at a forward price-to-earnings (P/E) ratio of 10.78X, which is lower than its five-year median of 11.94X and the industry average of 12.05X, indicating it is relatively undervalued compared to peers like HCA Healthcare, Inc. (12.60X) and Encompass Health Corporation (20.60X) [1] - The company generated $1.1 billion in free cash flow over the past 12 months, with a price-to-free cash flow (P/FCF) ratio of 11.21X, significantly below the broader medical sector's average of 22.75X, suggesting financial stability and efficient capital management [2] - Tenet's stock has increased by more than 40% in the past year, outperforming both the industry average and the S&P 500 Index [4] Earnings and Growth Drivers - In its latest quarterly report, Tenet posted adjusted earnings per share (EPS) of $3.44, exceeding the Zacks Consensus Estimate by 17.4% and outperforming management's projected range of $2.69-$3.31, driven by higher same-hospital admissions and a favorable payer mix [6] - The company forecasts adjusted EBITDA for 2025 to be between $3.975 billion and $4.175 billion, indicating a 2% year-over-year growth, with an adjusted EBITDA margin expected in the range of 19.3-19.9% [8] - The Zacks Consensus Estimate for 2025 adjusted earnings is currently pegged at $11.84 per share, with five upward estimate revisions in the past 30 days, and the consensus for 2026 EPS indicates 13.6% further growth [11] Debt Management and Financial Position - Tenet ended the fourth quarter with $3 billion in cash and cash equivalents, more than double its 2023 year-end balance, while long-term debt declined 12.1% to $13.1 billion [7] - The net debt-to-EBITDA ratio has improved to 2.61X, well below its five-year median of 4.64X and the industry average of 3.24X [8] Strategic Initiatives - Tenet is focusing on expanding its ambulatory surgery centers (ASCs) through a partnership with United Surgical Partners International (USPI), which held stakes in 518 ASCs and 25 surgical hospitals across 37 states by the end of the fourth quarter [9] - The company is investing in AI-driven technologies to streamline clinical and administrative processes, aiming to reduce costs and improve patient satisfaction [10] Market Outlook - The stock is currently trading below Wall Street's average price target of $174.83, implying a 32.7% upside from current levels [15] - Improving labor market conditions and higher patient admissions are expected to provide additional support for the stock's growth [17]

Hospital Operations - As of December 31, 2024, the Hospital Operations segment included 49 acute care and specialty hospitals, 135 outpatient facilities, and a joint venture in revenue cycle management with Conifer Health Solutions, LLC[12] - In 2024, the company opened a new 92-bed hospital in San Antonio and acquired a majority interest in a 36-bed rehabilitation hospital in El Paso[13] - The company sold six hospitals in California and three in South Carolina in 2024 to refine its portfolio and improve profitability[14] - The total number of licensed beds across all hospitals was 12,435 as of December 31, 2024[19] - Approximately 72% of the outpatient centers were located in Arizona and Texas, which may enhance operational efficiencies but also increase risk exposure[22] - The company owned over 650 physician practices and was affiliated with nearly 1,135 physicians as of December 31, 2024[34] - The Ambulatory Care segment held ownership interests in 518 ambulatory surgery centers and 25 surgical hospitals across 37 states as of December 31, 2024[26] - The company is focusing on expanding its ambulatory care business and improving accessibility at outpatient centers to address competitive challenges[56] Workforce and Labor Challenges - The company faced challenges in recruiting and retaining physicians due to a shortage in certain high-demand specialties[35] - Approximately 32% of the company's employees are nurses, with 21% of employees in the Hospital Operations segment represented by labor unions[36][45] - The company is experiencing shortages of advanced practice providers and critical-care nurses, leading to increased labor costs and reliance on higher-cost contract labor[42][44] - The company has made significant investments in education and training for newly licensed medical support personnel to streamline onboarding and reduce training expenses[44] - The company is actively engaging in community healthcare programs to increase access to healthcare careers and improve workforce recruitment[44] Financial Performance - Net operating revenues for 2024 reached $20,665 million, a 0.57% increase from $20,548 million in 2023[451] - Operating income significantly improved to $5,956 million in 2024, compared to $2,510 million in 2023, marking a 137.5% increase[451] - Net income available to Tenet Healthcare Corporation common shareholders surged to $3,200 million in 2024, up from $611 million in 2023, representing a 423.5% increase[451] - Basic earnings per share rose to $33.02 in 2024, compared to $6.01 in 2023, reflecting a 450.8% increase[451] - Total comprehensive net income for 2024 was $4,065 million, compared to $1,311 million in 2023, indicating a 210.5% increase[454] - The company reported a decrease in salaries, wages, and benefits to $8,801 million in 2024 from $9,146 million in 2023, a reduction of 3.8%[451] - Interest expense decreased to $826 million in 2024 from $901 million in 2023, a decline of 8.3%[451] - Net income for the year ended December 31, 2024, was $4,064 million, a significant increase from $1,311 million in 2023 and $1,001 million in 2022, reflecting a year-over-year growth of 210%[460] Regulatory and Compliance Issues - The company is subject to extensive government regulations, which may require adjustments to facilities and services to ensure compliance[59][60] - Compliance with HIPAA regulations is mandatory, with potential civil penalties for violations, which could increase liability risks[76] - The company operates under various federal and state antitrust laws, with heightened scrutiny from the FTC on healthcare transactions that may affect local patient service options[84] - The healthcare industry is subject to civil and criminal enforcement efforts, which could lead to penalties and affect the company's operations[70] - The company regularly enters into financial arrangements with physicians, ensuring compliance with anti-kickback and fraud laws[68] Investments and Capital Management - The company expects to complete construction of a new medical campus in Port St. Lucie, including a 54-bed surgical hospital, by late 2025[13] - Total assets increased to $28,936 million as of December 31, 2024, compared to $28,312 million in 2023, reflecting a growth of 2.2%[449] - Cash and cash equivalents rose significantly to $3,019 million in 2024, up from $1,228 million in 2023, marking an increase of 145.5%[449] - Shareholders' equity increased to $4,171 million in 2024, compared to $1,608 million in 2023, representing a growth of 159.5%[449] - The company has reserves for incurred but not reported claims, based on modeled estimates of losses and related expenses[98] Revenue Streams and Patient Care - The company reported net patient service revenues primarily from Medicare, Medicaid, managed care, and uninsured patients, reflecting the diverse revenue streams in its operations[472] - The company recognized grant income of $10 million in 2024, down from $16 million in 2023 and $194 million in 2022, showing a declining trend in grant income[468] - Total estimated costs for caring for uninsured and charity patients amounted to $617 million in 2024, compared to $609 million in 2023[525] - Revenue recognized from revenue cycle management services totaled $58 million in 2024, down from $71 million in 2023[527] Share Repurchase and Equity Management - The 2022 share repurchase program authorized up to $1.000 billion, with 5.889 million shares repurchased at an average price of $42.45[516] - The 2024 share repurchase program authorized up to $1.500 billion with no expiration date, allowing for flexible repurchases based on market conditions[518][519] - Total number of shares purchased under the 2024 share repurchase program reached 795,000 shares at an average price of $155.95 per share, with a remaining maximum dollar value of $1,376 million available for repurchase[520]

Financial Data and Key Metrics Changes - Tenet Healthcare reported operating revenues of $20.7 billion and consolidated adjusted EBITDA of $4 billion for 2024, representing a 13% growth over 2023 [8][21] - The full-year adjusted EBITDA margin improved by over 200 basis points to 19.3% compared to the prior year [9] - Fourth quarter adjusted EBITDA was $1.048 billion, with an adjusted EBITDA margin of 20.7%, up almost 200 basis points from Q4 2023 [21] Business Line Data and Key Metrics Changes - USPI generated $1.81 billion in adjusted EBITDA for 2024, a 17% increase over 2023, with adjusted EBITDA margins of 42.1% [10][22] - Same-facility revenues for USPI grew by 8.6%, driven by high acuity levels and favorable payer mix [22] - The Hospital segment generated $2.185 billion in adjusted EBITDA, a 9% increase over the prior year, despite the sale of 14 hospitals [12][21] Market Data and Key Metrics Changes - Same-facility revenues grew by 7.8% in 2024, significantly above long-term goals, with high acuity volume growth highlighted by a 19% increase in total joint replacements [11] - Same-store hospital admissions increased by 4.7%, reflecting strong utilization [12] - The company anticipates same-hospital admissions growth of 2% to 3% and adjusted admissions growth of 2% to 3% for 2025 [31] Company Strategy and Development Direction - Tenet is focused on expanding its portfolio through M&A and de novo development, planning to invest approximately $250 million annually in the ambulatory space [16][34] - The company aims to enhance its operational efficiency and profitability by shifting towards higher acuity procedures and expanding its service offerings [19][78] - Tenet plans to be active in share repurchases, particularly at current valuation multiples, reflecting a commitment to returning capital to shareholders [14][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong volume environment continuing into 2025, supported by favorable demographics and a robust coverage environment [48] - The company is prepared for potential regulatory changes and believes its operational discipline will allow it to navigate these challenges effectively [19][56] - Tenet's guidance for 2025 projects adjusted EBITDA growth of 7% at the midpoint, with expectations of continued strength in same-store volumes and effective pricing [30] Other Important Information - The company generated $1.1 billion in free cash flow for 2024, with a year-end leverage ratio of 2.5x EBITDA, reflecting significant balance sheet improvement [25][26] - Tenet repurchased 5.6 million shares for $672 million in 2024, indicating a strong commitment to shareholder returns [26] Q&A Session Summary Question: Cash flow guidance and leverage targets - Management highlighted improvements in free cash flow generation and expressed comfort with current leverage levels, indicating plans for share repurchases [41][42] Question: Volume environment expectations - Management anticipates a strong volume environment continuing into 2025, with no significant changes observed in demand patterns [48] Question: Medicaid and political risk management - Management emphasized operational discipline and understanding of business economics to navigate potential regulatory changes, particularly in the Medicaid space [53][56] Question: ASC case mix and acuity - Management clarified that high acuity work, particularly in orthopedics, is driving revenue growth despite stable case mix percentages [61] Question: Guidance assumptions for supplemental payments and exchanges - Management expects consistent Medicaid supplemental payments year-over-year and positive growth from exchange populations [67] Question: Supply dynamics and cost management - Management indicated that supply costs as a percentage of revenue may increase slightly due to the acuity strategy but expect overall balance in 2025 [71] Question: Same-store revenue guidance rationale - Management explained that the guidance reflects long-term growth averages, despite recent higher growth rates, and emphasizes a shift towards higher acuity procedures [76][79] Question: Managed care contracting and denial activity - Management reported ongoing commercial rate increases and high visibility into contracting for 2025, with a focus on reducing denial rates [85][86] Question: Hospital capacity and market-level growth - Management noted that the majority of expected growth is driven by market demand, with some contributions from increased capacity [90] Question: Competitive landscape for ASC transactions - Management stated that the competitive landscape remains stable, with a focus on de novo development as a key growth strategy [130]

Tenet Healthcare (THC) came out with quarterly earnings of $3.44 per share, beating the Zacks Consensus Estimate of $2.93 per share. This compares to earnings of $2.68 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 17.41%. A quarter ago, it was expected that this hospital operator would post earnings of $2.33 per share when it actually produced earnings of $2.93, delivering a surprise of 25.75%.Over the last four quarters, th ...