After reporting that second-quarter revenue was less than industry watchers' were hoping for and that admissions to its hospitals fell, shares of Tenet Healthcare (NYSE:THC) were losing 16.7% of their value at 3:45 p.m. EDT Tuesday.
Revenue last quarter fell 6% year over year to $4.5 billion as hospital admissions fell 2.3% and net operating revenue in its hospital operations segment fell 8.6%. The revenue was $60 million light of analyst forecasts and at the low end of its guidance for between $4.475 billion and $4.675 billion exiting Q1.
The results look a bit better once you adjust for businesses that Tenet Healthcare has divested. On a same-hospital basis, adjusted admissions were only down 0.2%. Prices were also firm, with net patient revenue growing by 3.2% to $3.432 billion.
Tenet Healthcare also reported that sales in its ambulatory segment were up 12.5% to $531 million in Q2 and sales for its Conifer segment decreased 3.5% to $386 million.
On the bottom line, Tenet Healthcare's net income improved to $24 million, or $0.23 per diluted share, from a net loss of $56 million, or $0.56 per diluted share, one year ago.
The company's guiding for third-quarter revenue and adjusted EPS of between $4.3 billion and $4.5 billion and $0.10 to $0.24, respectively. For the full year, it expects revenue of between $17.9 billion and $18.3 billion and adjusted EPS from continuing operations of $1.54 to $1.88. The full-year revenue outlook is unchanged from the first quarter and the bottom-line forecast is up from prior estimates for between $1.36 to $1.70.
The quarter marked the first time in two quarters that management didn't over-deliver on its top line. Given that Tenet Healthcare's shares were recently hitting new highs, investors appear to be concluding that it could struggle to maintain its profit strength without a meaningful uptick in admissions, and as a result, share prices are too rich.
Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.