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Tenet Healthcare’s (THC) Q2 Loss In Line with Estimates


Tenet Healthcare Corp. THC incurred second-quarter 2017 adjusted net loss from continuing operations attributable to its shareholders of 17 cents per diluted share that met the Zacks Consensus Estimate. The figure compared unfavorably with earnings of 38 cents in the year-ago quarter due to lower revenue generation.

This underperformance primarily stemmed from $55 million decline in California Provider Fee revenues and a $15 million fall in electronic health record incentives.

Operational Update

Second-quarter net operating revenues came in at $4.8 billion, down 1.4% from the prior-year quarter. Revenues also missed the Zacks Consensus Estimate.

Tenet Healthcare’s same-hospital exchange admissions were 5,488 in the second quarter, down 2.2% year over year.

Same-hospital exchange outpatient visits were 58,873 in the quarter, up 10.1% from the year-ago quarter.

Tenet Healthcare’s provision for doubtful accounts was $371 million, representing a ratio of 7.2% of revenues before bad debt compared with $352 million in the prior-year quarter, or 6.7% of revenues before bad debt. The increase in the bad debt ratio was primarily attributable to a $26 million increase in uninsured revenues.

Total operating expenses of $4.5 billion decreased 2.2% year over year due to a substantial decline in litigation and investigation costs.

Quarterly Segment Details:

Hospital & Other

Net operating revenues in the Hospital Operations and Other segment decreased 0.1% from the last-year quarter to $4.1 billion. This was primarily due to a decline in adjusted admissions and the company not being able to record revenues under the California Provider Fee Program in the second quarter.

On a same-hospital basis, patient revenues were $4.036 billion, up 0.4% from second-quarter of 2016.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $346 million, down 19% year over year. This stemmed from $55 million decline in revenues from the California Provider Fee program and a $15 million fall in electronic health record incentives.

Ambulatory Segment:

The Ambulatory segment generated net operating revenues of $472 million, up 6.8% year over year.

In addition, the segment reported adjusted EBITDA of $164 million, up 18% year over year.

Conifer Segment:

Conifer’s revenues increased 3.6% from the prior-year quarter to $400 million on the back of 11.5% higher revenues generated from third-party customers.

The segment reported $60 million of adjusted EBITDA in the reported quarter, down 4.8% year over year.

Tenet Healthcare Corporation Price, Consensus and EPS Surprise

Financial Position

As of Jun 30, 2017, Tenet Healthcare had cash and cash equivalents of $475 million, down 34% from year-end 2016.

The company exited the second quarter with $15.012 billion of long-term debt, down 0.3% from year-end 2016.

As of Jun 30, 2017, shareholders’ equity was $373 million, down 11% from Dec 31, 2016.

Net cash provided by operating activities for the six months ended Jun 30, 2017 was $401 million, representing a 31% decline from the first half of 2016.

2017 Outlook Lowered

Tenet Healthcare projects revenues in the range of $19.1 billion to $19.4 billion, down from the previously guided range of $19.7–$20.1 billion.

Adjusted EBITDA is expected between $2.450 billion and $2.550 billion, down from the previous projection of $2.525–$2.625 billion.

Adjusted earnings per diluted share is projected in the range of 69–99 cents, lower from the earlier projection of $1.05–$1.30.

Tenet Healthcare expects adjusted free cash flow of $525–$725 million, down from the prior projection of $600–$800 million. It expects net cash provided by operating activities between $1.2 billion and $1.4 billion.

Net loss from continuing operations is likely to range between $115 million and $90 million, as against the previous guidance of net income of $71–$95 million.

Third-Quarter Outlook

For the third quarter, the company expects revenues in the range of $4.6–$4.8 billion compared with the previously guided range of $4.85–$5.05 billion.

It expects adjusted EBITDA to range between $500 million and $550 million, down from the previously guided range of $500–$600 million.

Net loss from continuing operations is expected between $157 million and $147 million, wider than the previously guided range of loss of $30 million–$25 million.

Adjusted loss per share from continuing operations is expected between 35 cents to 20 cents, much wider than the previously guided range of a loss of 20 cents to 10 cents.

Zacks Rank and Performance of Other Insurers

Tenet Healthcare presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the other firms in the medical sector that have reported their second-quarter earnings so far, the bottom lines of Centene Corp. CNC, Humana, Inc HUM and Anthem, Inc. ANTM surpassed their respective Zacks Consensus Estimate.

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