Larry Robbins Continues To Believe In Tenet Healthcare Corp. (THC)’s Future

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Merger and acquisition activity has been very strong in the U.S. healthcare provider industry over the last few years, as companies started to recover from the reduced profitability and operating margins brought about by the financial crisis. The Affordable Care Act has also played a crucial role in the wave of hospital industry consolidation in recent years. Companies in the industry have been attempting to enhance economies of scale so as to lower their costs, which could in turn allow them to deal with the pressure on revenues. Tenet Healthcare has been growing as well; the healthcare services company has grown to 80 hospitals from 50 in the last two years and to 150 ambulatory surgery centers from 25. Earlier this summer, Tenet completed a joint venture transaction with Welsh, Carson, Anderson & Stowe that combines the short-stay surgery and imaging center assets of both Tenet and United Surgical Partners International to create a leading short-stay surgery platform in the United States. However, all of the mergers and other consolidation deals seem to have had a short-term negative impact on the company’s financials. Tenet recently announced that its loss for the second quarter widened to $61 million from the loss of $26 million reported a year ago, partly owning to a $136 million in write-downs, restructuring charges, acquisition-related costs, and other one-time items. The weak financial results for the second quarter have also put some downward pressure on the company’s stock.

Tenet Healthcare expects to deliver earnings per share of $0.49 and revenue of $4.65 billion to $4.85 billion for the current quarter, whereas the analysts polled by Thomson Reuters anticipate EPS of $0.40 and revenue of $4.56 billion. It’s also worth mentioning that the company lowered its earnings estimate for the year, with it expecting to post EPS of $1.32 to $2.21, compared to the previous estimate of $1.32 to $2.40. However, Tenet believes that it will be able to generate higher revenues than previously-anticipated and raised its revenue guidance to the range of $18.1 billion to $18.5 billion, from the previous range of $17.4 billion to $17.7 billion.

Disclosure: None

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