Tenet Healthcare (THC) Q3 Earnings Miss, Revenues Beat

Tenet Healthcare Corp. (NYSE:THC) reported third-quarter 2016 operating earnings of 16 cents per share that missed the Zacks Consensus Estimate of 19 cents by 15.8%. Also, the bottom line deteriorated 44.9% on a year-over-year basis.

Tenet Healthcare reported a net loss from continuing operations of $9 million, or 9 cents per share, in the third quarter of 2016, narrowed 67.9% year-over-year from a net loss of $28 million, or 28 cents per share, in the third quarter of 2015.

The company reported adjusted EBITDA of $570 million, up 0.7% year over year

Operational Update

Third-quarter net operating revenue came in at $4.8 billion, up 3.3% from the prior-year quarter. An increase in revenues from hospital operations, the Conifer segment and the ambulatory segment primarily drove the upside. Revenues also surpassed the Zacks Consensus Estimate of $4.7 billion by 2.1%.

Tenet Healthcare’s provision for doubtful accounts was up 7.3% year over year to $367 million, representing a ratio of 7% of revenues before bad debt. Uncompensated care costs were $1.3 billion, up 1.15% year over year.

Same-hospital exchange admissions were 5,465 in the third quarter, up 16.9% from the third quarter of 2015. Same-hospital exchange outpatient visits were 51,015, up 32% year over year.

Uninsured plus charity admissions increased 10.5% year over year on a same-hospital basis in the third quarter of 2016. Uninsured plus charity outpatient visits decreased 2.8% on a same-hospital basis.

Segment Details:

Hospital Segment

Net operating revenue in the Hospital Operations and other segment was $4.2 billion, down 0.4% from the last-year quarter due to hospitals that have been divested since that time. Patient revenues increased to $3.8 billion, up 5.3% from the prior-year quarter. The upside was driven by a 1.4% increase in adjusted patient admissions and a 3.9% rise in net patient revenue per adjusted admission.

Ambulatory segment

The Ambulatory segment delivered net operating revenue of $448 million, up 36.2 % year over year. In addition, the segment generated adjusted EBITDA (Earning before Interest, Taxes, Depriciation and Amortization) of $157 million, up 28.7% year over year.

Conifer Segment

Conifer’s revenues increased 14.7% from the prior-year quarter to $398 million. Conifer’s revenues from third-party customers surged 30% to $239 million. The segment generated $79 million of adjusted EBITDA in the reported quarter, up 29.5% year over year.

TENET HEALTH Price, Consensus and EPS Surprise

Financial Position

As of Sep 30, 2016, Tenet Healthcare had cash and cash equivalents of $649 million, up 82.3% from $356 million as of Dec 31, 2015.

The company exited the third quarter with total assets worth $24.5 billion, up 3.3% from $23.7 billion as of Dec 31, 2015.

Shareholders’ equity was $528 million as of Sep 30, 2016, down 23.6% from $691 million as of Dec 31, 2015.

Net operating cash flow in the first nine months of 2016 increased 1.9% from $835 million in the prior-year period to $851 million.

2016 Outlook

For 2016, Tenet Healthcare projects revenues in the range of $19.65–$19.80 billion, adjusted EBITDA of $2.4–$2.45 billion and adjusted earnings per diluted share of $1.16–$1.21.

Tenet Healthcare expects adjusted free cash flow of $400–$600 million.

Net loss from continuing operations are estimated in the range of $99–$94 million. Loss per share is expected to be in the range of $1 to 95 cents.

Net operating cash flow is projected between $1.2 billion and $1.3 billion.

Fourth-Quarter 2016 Outlook

For the fourth quarter, the company expects revenues in the range of $4.9–$5 billion, adjusted EBITDA of $600–$650 million and adjusted earnings per diluted share of 17–22 cents.

Zacks Rank and Performance of Other Stocks

Tenet Healthcare presently carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the other stocks in the medical sector that have reported their third-quarter earnings so far, the bottom line at Aetna Inc. (NYSE:AET) and Molina Healthcare Inc (NYSE:MOH) surpassed the Zacks Consensus Estimate, while the earnings of Adeptus Health Inc. (NYSE:ADPT) missed estimates.

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