Why Tenet Healthcare Is Soaring Today

Shares jumped after the for-profit hospital operator reported better-than-expected results and provided bullish guidance.

Brian Feroldi
Brian Feroldi
Feb 26, 2019 at 11:23AM
Health Care

What happened

In response to the hospital operator posting fourth-quarter results, shares of Tenet Healthcare (NYSE:THC) rose as much as 23% in early morning trading on Tuesday. The stock was up about 12% as of 10:45 a.m. EST. 

So what

Here's a review of the headline numbers from the period:

  • Revenue fell 7.2% to $4.62 billion. That figure was ahead of the $4.5 billion that Wall Street had expected.
  • Net loss was $5 million in the fourth quarter, or $0.05 per share.
  • Adjusted earnings per share was $0.51, far ahead of the $0.28 that traders were projecting.

Zooming out to 2018, here are the numbers from the year:

  • Revenue fell 4.5% to $18.3 million.
  • Net income was $108 million, or $1.04 per share.
  • Adjusted EPS was $1.86. That was ahead of management's guidance range and exceeded the $1.63 that Wall Street had predicted.
Team of business people giving high fives

Image source: Getty Images.

Here's what management expects to happen in the upcoming quarter and year:

  • First-quarter 2019 revenue is projected to land between $4.3 billion to $4.6 billion. For context, Wall Street was anticipating $4.5 billion in total revenue.
  • First-quarter 2019 adjusted EPS is expected to come in between $0.10 to $0.43. The current consensus estimate is $0.41. 
  • Full-year 2019 revenue is forecast to be between $18 billion to $18.4 billion. The midpoint of this range is ahead of the current consensus estimate of $18.1 billion.
  • Full-year 2019 adjusted EPS is expected to be between $2.08 to $2.59. This range also compares favorably to the current estimate of $1.84.

Traders are cheering the better-than-expected quarterly results and upbeat guidance.

Check out the latest Tenet earnings call transcript.

Now what

Tenet handily beat all of its adjusted EPS targets in 2018. That's a good sign for investors as it hints that the company's guidance for 2019 could be conservative. 

However, Tenet's revenue is heading in the wrong direction, so it's hard for me to get excited about owning this business over the long haul. If you're an investor who's interested in the for-profit hospital sector, then there are probably other businesses more deserving of your time and attention.