Tenet Healthcare (THC) Hits 52 Week High: More Upside Left?


On Aug 25, shares of Tenet Healthcare Corporation (THC Quick QuoteTHC ) touched a 52-week high of $74.67 before closing the session a tad lower at $73.67.

Overall bullish scenario in the industry, favourable second-quarter results, initiatives to increase its solvency level, extensive use of data and analysis plus higher volumes in admissions, outpatient visits, ER volumes and surgeries led to the upside.

The currently Zacks Rank #3 (Hold) hospital company’s stock has increased 84.5% year to date, comparing favorably with the industry’s average of 42.9%.

Zacks Investment Research
Image Source: Zacks Investment Research

Other companies in the same space, such as Universal Health Services, Inc. (UHS Quick QuoteUHS ) , Acadia Healthcare Company, Inc. (ACHC Quick QuoteACHC ) and Community Health Systems, Inc. (CYH Quick QuoteCYH ) have also gained 21.7%, 14.8% and 42.6%, respectively, in the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

What’s Driving This Outperformance?

Tenet Healthcare has been gaining from revenues and improving patient volumes. In the last reported quarter, its adjusted net earnings of $1.59 per share surpassed the Zacks Consensus Estimate by 45.9%. The bottom line climbed 26.2% year over year.

Concurrent with second-quarter results, the company updated its outlook for 2021. For the current year, it projects net income per share to be $6.25-$7.17, higher than the prior guidance of $2.98-$4.69. Adjusted EBITDA is estimated to be $3.15-$3.25 billion, up from the prior range of $3-$3.2 billion.
Adjusted EPS is expected within $5.23-$5.73, higher than the previous guidance of $4.12-$5.46. This should instill investors’ confidence in the stock.

 Tenet Healthcare boasts a solid inorganic growth story. It recently closed the buyout of an ASC in ! Washington and a new surgical hospital in ASC in the Central Valley of California. All these initiatives poise the company well for long-term growth.

The hospital company is focused on divesting its non-core and unprofitable business units to repay its debt and maintain financial liquidity. A number of divestitures made in the past three years have streamlined its operations and have generated funds to pay down debt. The company’s strategic priorities include completion of hospital sell-offs and allocation of capital to higher return investments across the capital structure.

The company’s spin-off of its Conifer business into an independent publicly-traded entity is expected to close by the end of 2021. It is likely to reduce its debt burden by using the proceeds from this transaction. The hospital company will use proceeds received from its recent divestiture of five hospitals and related operations in the Miami-Dade and Southern Broward counties to pay for the retirement of debt.

Also, it takes up initiatives to enhance its solvency position.

The company’s enhanced portfolio and strategic initiatives are likely to bode well for the long haul. This hospital industry player is poised to benefit from cost-curbing initiatives, rising volumes and a solid 2021 guidance.

It has an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

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