Tenet Healthcare Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Tenet Healthcare (NYSE: THC  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

The medical-care industry has gone through massive changes in the past few years as health-care reform has fundamentally changed the market. With potentially millions of newly insured patients, can Tenet take advantage of the opportunity from Obamacare? Let's take an early look at what's been happening with Tenet Healthcare over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on Tenet Healthcare

Analyst EPS Estimate

$0.68

Change From Year-Ago EPS

42%

Revenue Estimate

$2.34 billion

Change From Year-Ago Revenue

(2.8%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Tenet Healthcare give investors some healing this quarter?
Analysts have recently gotten more optimistic about Tenet's long-term prospects, raising their full-year 2013 estimates by more than a nickel per share. Shareholders have been even more enthusiastic, with the stock up nearly 40% since mid-November.

Fears about the impact of the Affordable Care Act have rippled across the health-care industry ever since the law first passed. Yet even with the Supreme Court upholding the law during the summer, 2012 was an extremely strong year for hospital stocks. HCA Holdings (NYSE: HCA  ) and Community Health Systems (NYSE: CYH  ) posted even stronger gains than Tenet did, as they anticipated better conditions resulting in part from the act's provisions, especially beginning in 2014. The successful resolution of the fiscal cliff also helped HCA, Community Health, and Tenet by avoiding what could have been a 27% cut in Medicare reimbursement rates.

Contrary to some popular opinion, Tenet actually expects Obamacare to help it going forward. In January, CEO Trevor Fetter said that mandates to carry health insurance and expansion of Medicaid coverage will reduce its exposure to uninsured patients. With Tenet, HCA, and Community Health all carrying bad-debt provisions for those without insurance, the new law could help them eventually eliminate those provisions, boosting earnings.

Because many of these favorable provisions haven't taken effect yet, you should take backward-looking numbers from Tenet's quarterly report with a grain of salt. With the business due to improve in the coming years, the big issue to focus on will be whether Tenet's acquisition strategy will help it set the stage for even larger growth in the future. Even with big share-price gains, Tenet and its peers all look like promising investments for the years ahead.

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