Tenet Healthcare To Divest Units For Streamlining Operations

Tenet Healthcare Corporation (NYSE:THC) recently entered into an agreement with Methodist Le Bonheur Healthcare to divest its hospitals and other operations in the Memphis area. This sale is expected to get completed in 2020, subject to closing conditions and regulatory approvals.

This deal includes the divestment of Saint Francis Hospital, Memphis and Saint Francis Hospital, Bartlett, the physician practices related to both hospitals, and six MedPost urgent care centers. Per the terms of the pact, post closure, Tenet’s Conifer Health Solutions unit will keep providing revenue cycle management services to the divested hospitals.

Tenet Healthcare has been 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 generated funds to pay down debt. Its strategic priorities include completing hospital divestitures and allocating capital to higher-return investments across the capital structure. Tenet Healthcare sold nine Aspen facilities in the United Kingdom, eight hospitals in the United States during 2018 and three in the Chicago area in January 2019.

It recently announced that it will complete the spin-off of its Conifer business as an independent publicly traded company by the end of the second quarter of 2021. The company is likely to reduce its debt burden by using the proceeds from this transaction. These divestitures would help Tenet Healthcare focus on its core operations and would help the stock to turn around.

Shares of this Zacks Rank #3 (Hold) company have soared nearly 87% in the past year, outperforming its industry’s increase of 15%. This solid upside was primarily driven by the company’s strong fundamentals like alliances, partnerships, acquisitions and divestitures of its non-core business units.

Stocks to Consider

Investors interested in the medical sector might consider some better-ranked stocks like Select Medical Holdings Corporation (NYSE:SEM) , WellCare Health Plans, Inc. (NYSE:WCG) and Genesis Healthcare, Inc. (NYSE:GEN) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Select Medical Holdings operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics and occupational health centers. In the trailing four quarters, the company’s average beat was 11.07%. The stock sports a Zacks Rank #1.

WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 17.32% in the preceding four quarters. It carries a Zacks Rank #2 (Buy).

Genesis Healthcare operates skilled nursing facilities and assisted/senior living homes. In the last four quarters, the company delivered average beat of 80.96%. It has a Zacks Rank of 1.

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