Tenet Healthcare Tops Estimates as Revenues Rise

| About: Tenet Healthcare (THC)

Tenet Healthcare Corporation (NYSE:THC) reported fourth quarter 2009 earnings (from continuing operations) of $24 million, or 3 cents per share compared to the Zacks Consensus Estimate of 1 cent. The company suffered a loss (from continuing operations) of $2 million or 1 cent per share in the year-ago quarter (full conference call transcript here).

Net operating revenues in the reported quarter climbed 3.7% to $2.26 billion from $2.18 billion in the year-ago quarter. The company exited the quarter with cash and cash equivalents of $690 million, which reflected a decrease of $41 million since Sep 30, 2009. Capital expenditures for the quarter were $192 million.

For full year 2009, Tenet earned 43 cents per share (from continuing operations) as against 15 cents in 2008. In fiscal 2009, net operating revenues came in at approximately $9 billion compared to $8.6 billion in 2008, up approximately 4.7%. The Zacks Consensus Estimate for 2009 hinted at earnings of 15 cents.

Same-Hospital Data for the Quarter

Revenues increased approximately 3.5% year-over-year to $2.24 billion on a same-hospital basis. Same-hospital data does not include Sierra Providence East Medical Center, in El Paso, which opened on May 21, 2008. In the fourth quarter of 2009, there were 48 hospitals in same-hospital operations.

Pricing improvement was evident across all key metrics. Net in-patient revenue per admission increased 3.5% to $11,466 in the fourth quarter of 2009. Net out-patient revenue per visit increased 2.3% year-over-year to $710 in the reported quarter.

Total admissions in the reported quarter fell by 0.9% as compared to the fourth quarter of 2008. Commercial managed care admissions decreased 5.3% compared to the year-ago quarter. Flu related admissions for the reported quarter came in at 666. Governmental managed care admissions in the reported quarter increased 4.3% compared to the fourth quarter of 2008.

Total same-hospital outpatient volume increased 3.5%, in the fourth quarter of 2009 compared to the year-ago period. The company has now reported year-over-year growth in outpatient visits in seven of the last eight quarters. Same-hospital bad debt ratio came in at 7.9% of net revenues compared to 7.6% in the year-ago period.


Tenet forecasts fiscal 2010 net operating revenues in the range of $9.35 billion - $9.55 billion, representing a growth of 4% - 6%. The Zacks Consensus Estimate for 2010 hints at earnings of 22 cents.

Our Recommendation

Tenet currently has a Zacks Rank #1 (Strong Buy), implying that the stock is expected to outperform the broader U.S. equity market over the next one to three months. We are also positive on the company in the long-run. The Outperform recommendation implies that the stock is expected to outshine the overall U.S. equity market over the next six to twelve months.

Although the competition in the industry is a concern, we take comfort from the strong financial results reported by the company in the most recent quarter. Furthermore, the company’s emphasis on improving its quality of care is encouraging.