In response to posting better-than-expected fourth-quarter results and revising its guidance upward, shares of Tenet Healthcare (NYSE:THC), a for-profit hospital company, rose as much as 15% in early morning trading on Tuesday. Shares were up about 9% as of 10:55 a.m. EST.
Here's a review of the key numbers from the quarter:
- Revenue grew 2.5% to $4.98 billion. That was ahead of the $4.89 billion that analysts were expecting.
- Net loss was $229 million, or $2.27 per share. However, this net loss was primarily attributable to a $252 million non-cash charge related to the writedown of assets and employee severance.
- Adjusted profit was $1.40 per share. That also compared favorably to the $1.30 that Wall Street had predicted.
Turning to guidance, here's what management is projecting for fiscal year 2018:
- Revenue is estimated to land between $17.9 billion and $18.3 billion.
- Adjusted EPS is now expected to land between $0.73 and $1.07 per share. This represents a nice bump over its previous guidance range of $0.58 to $0.97 per share. The jump was credited to higher-than-expected Medicaid reimbursements.
Given the better-than-expected quarterly results and increased guidance, it isn't hard to figure out why shares are rallying on Tuesday.
Tenet's shareholders might want to thank Glenview Capital Management and Camber Capital Management for Tuesday's rally. These two funds have taken a major position in Tenet and are actively working with the company to help get its financial house in order. While there's still plenty of work to do, Tenet's shares have rallied more than 40% since the start of the year, so it appears that their pressure is starting to unlock value for shareholders.
It's certainly a possibility that the rally can continue if the company's financials keep improving. However, Tenet's shares have been a dreadful investment in recent years, so I do not have a lot of faith in this business. That's why my plan is to take a wait-and-see approach to Tenet's stock and focus my time on far more exciting businesses.