Tenet Healthcare Beats Q4 Earnings: But 2026 EBITDA Margin May Decline

Core Insights - Tenet Healthcare Corporation (THC) reported fourth-quarter 2025 adjusted earnings per share (EPS) of $4.70, exceeding the Zacks Consensus Estimate by 15.2%, with a year-over-year increase of 36.6% [1] - Net operating revenues rose 8.9% year over year to $5.53 billion, surpassing the consensus mark by 1.4% [1] Financial Performance - Adjusted net income for the quarter was $413 million, a 25.2% increase year over year [3] - Adjusted EBITDA improved 12.9% year over year to $1.18 billion, exceeding the estimate of $1.13 billion, with an adjusted EBITDA margin expanding 70 basis points to 21.4% [3] - Salaries, wages, and benefits costs increased 6.1% year over year to $2.2 billion, while supply costs rose 8.6% and net other operating expenses increased 10.8% [4] Segment Performance - Hospital Operations and Services segment recorded net operating revenues of $4.09 billion, up 7.3% year over year, driven by improved Medicaid supplemental revenues and a favorable payer mix [5] - Adjusted EBITDA for the Hospital segment climbed 16.4% year over year to $603 million, with an adjusted EBITDA margin of 14.7%, improving 110 basis points [6] - Ambulatory Care segment's net operating revenues rose 13.8% year over year to $1.43 billion, supported by facility buyouts and expansion of service lines, with adjusted EBITDA at $580 million, a 9.4% increase [7] Financial Position - As of December 31, 2025, Tenet Healthcare had cash and cash equivalents of $2.88 billion, down from $3.02 billion at the end of 2024, while total assets increased to $29.7 billion from $28.9 billion [8] - Long-term debt amounted to $13.1 billion, slightly up from the previous year, with total shareholders' equity increasing to $4.22 billion from $4.17 billion [9] Cash Flow and Share Repurchase - Tenet generated $3.5 billion of net cash from operations in 2025, a 72.9% year-over-year increase, with free cash flows improving 126.7% to $2.5 billion [11] - The company repurchased $198 million in shares during the fourth quarter and $1.4 billion in 2025, with a remaining share repurchase authorization of approximately $1.49 billion [12] 2026 Outlook - Net operating revenues for 2026 are projected to be between $21.5 billion and $22.3 billion, higher than the $21.3 billion in 2025 [13] - Adjusted EBITDA is expected to range from $4.485 billion to $4.785 billion, with an estimated adjusted EBITDA margin of 20.9-21.5%, indicating a potential decline from 2025 [14] - Free cash flow is anticipated to remain between $2.94 billion and $3.29 billion, with capital expenditures projected at $700-$800 million [15]