4. Tenet Healthcare Corporation (NYSE:THC)
Number of Hedge Fund Holders: 63
PE Ratio as of August 1: 5.74
Tenet Healthcare Corporation (NYSE:THC) is a diversified healthcare services company headquartered in Dallas, Texas. It owns and operates acute care hospitals, ambulatory surgical centers, diagnostic imaging centers, and other healthcare facilities through its subsidiaries and affiliates. Hospital Operations, Ambulatory Care, and Conifer are the business segments through which it operates.
THC is viewed as a particularly inexpensive company to purchase right now since its PE ratio of 5.74 is less than the weighted average PE ratio of 38.73 for healthcare facilities.
Compared to the industry average of 1.76 PEG ratio (5 years projected), THC seems to be at a discounted price.
It has 63 hedge fund holders as of Q1 2024. The company’s largest stakeholder, Thomas Bailard’s Bailard Inc, has 5,496 shares, valued at $731,133.
After Q2 2024 results were released, Tenet’s stock increased by about 5%, bringing its year-to-date gain to more than 90%. Better-than-expected second-quarter earnings and an upbeat updated forecast sent Tenet Healthcare’s shares to their highest point in more than 20 years. Increasing patient numbers and service fees drove the company’s outstanding success.
Tenet beat estimates with an adjusted EPS of $2.31 for the second quarter. During the same quarter last year, net operating revenue climbed by 0.8% to $5.1 billion, while adjusted EBITDA improved by $102 million to $945 million, demonstrating robust operational efficiency. The prior range of $20 billion to $20.4 billion has been revised upward, and the company now forecasts full-year operating revenue between $20.6 billion and $21.0 billion.
In Q2 2024, increased spending on patient care propelled the ambulatory segment’s notable 21.1% revenue gain, which reached $1.14 billion as compared to. the same quarter last year. On the other hand, despite an increase in admissions, hospital segment revenue fell by 4.3% to $3.96 billion as a result of a reduction in facilities.
Investments in AI technology and ambulatory surgery centers (ASCs) are what are driving Tenet’s expansion. In its ASC company, the company expects long-term volume growth of 1% to 3%. Tenet has also been aggressively repurchasing shares and paying down debt to improve its financial standing.
Mizuho Securities has maintained its Outperform rating and changed its price objective for Tenet Healthcare from $145 to $170. This news comes after a robust quarter, especially in the acute care and ambulatory segments. The price expectations set by Deutsche Bank and Citi for Tenet have also been increased. Both Deutsche Bank and Citi maintained their buy recommendations, with Deutsche Bank raising its objective to $160 and Citi setting a new goal of $171. Based on Tenet’s strong second-quarter results and revised 2024 outlook, which includes a projected $3.9 billion in EBITDA, these changes have been made.
Meridian Contrarian Fund explained why Tenet Healthcare Corporation (NYSE:THC) shares jumped nearly 40% in its first quarter 2024 investor letter:
“Tenet Healthcare Corporation (NYSE:THC) is a top-ten U.S. operator of hospitals, outpatient surgery centers, and healthcare business process services. We initiated our position in late 2022 as we believed that the market’s short-term focus on COVID-caused staffing and admissions challenges overshadowed the value of Tenet’s long-term strategy of growing outpatient surgery centers. Outpatient surgery provides a cost-effective and patient-centered level of care that patients prefer and a Caroline business model that drives significantly higher returns to Tenet above that of the legacy hospital model. Tenet surged nearly 40% in the first quarter as the company executed nine hospital sales at valuations above where the stock trades. These divestitures drive three improvements to incremental return on equity by allowing Tenet to reduce debt, accelerate the corporate shift to higher-returning outpatient surgery centers, and free more capital to be returned to shareholders via stock buybacks. While the divestitures temporarily depress Tenet’s earnings growth, it accelerates our core thesis. We remain optimistic about the company’s newfound capital flexibility, and during the quarter we maintained our holding in Tenet.”
Greenlight Capital stated the following regarding Tenet Healthcare Corporation (NYSE:THC) in its first quarter 2024 investor letter:
“We had two material winners in the long portfolio. Tenet Healthcare Corporation (NYSE:THC) rose 39%, benefitting from ongoing strength in healthcare utilization and the sale of additional hospitals at premium multiples, suggesting that the stock was significantly undervalued.”
Tenet Healthcare is in a good position to develop because of its impressive quarterly performance, smart capital management, and optimistic analyst projections. The firm is more appealing to investors because of its emphasis on growing its ASC segment and utilizing technology.
