Tenet Healthcare Touches New 52-Week High - Analyst Blog

On Jun 6, 2014, Tenet Healthcare Corporation THC scaled a new 52-week high of $50.25. The company's shares have been riding high, mainly driven by its efforts to improve patient care and its mergers and acquisition activities.

Earlier, Tenet Healthcare had reported first-quarter 2014 loss that however, compared favorably with the Zacks Consensus Estimate. This Zacks Rank #3 (Hold) hospital service provider had previously delivered positive earnings surprises in two out of the last four quarters with an average beat of 9.99%.

Following Tenet Healthcare's earnings release on May 5, 2014, its shares gained 8.5% to close at $49.22 in the last trading session. The year-to-date return from the stock was 16.85%, much above the S&P 500's return of 5.46% and that of another player in the industry, Community Health Systems, Inc. CYH with returns of 14.31% over the same period.

Tenet Healthcare has been upfront in its M&A activities over the last one year. These endeavors have also helped the company to deliver improved results. Of these, the most important was the Vanguard acquisition. Tenet Healthcare expects synergies from this acquisition in 2014, which is likely to increase in the long run. The proposed acquisition of Emanuel Medical Center announced in Feb 2013, the collaboration with Yale New Haven Health System in Connecticut in Mar 2014, contract extension with Cigna Corp. CI in Mar 2014 and the recent acquisition of Texas Regional Medical Center (last week) are also expected to boost operations and enhance membership.

Tenet Healthcare's formation of Accountable Care Organization ACO also looks promising. Over the past one year, the company has collaborated with Blue Cross and Blue Shield of Texas (BCBSTX), Aetna Inc. AET and Florida Blue. These initiatives are in sync with the company's agenda to provide high-quality care to medical members at an affordable price, which going forward should attract more customers.

Tenet Healthcare's outpatient business has been doing well for quite some time and has contributed immensely to revenues over the past one year. With the launch of the MedPost Urgent Care, a national brand of urgent care centers in May 2014, this business is expected to improve further as urgent care forms an important part of the outpatient business.

Such upgrades in its services, along with expansion of inorganic growth strategies, keep us optimistic about the stock's performance. The long-term growth rate of the stock is 12.20%.