Tenet’s Profit Misses Analysts’ Estimates on Costs

Tenet Healthcare Corp., the third-largest U.S. hospital company, reported fourth-quarter income helped by higher admissions and reiterated its 2013 forecast.

Adjusted earnings before interest, taxes, depreciation and amortization of $336 million beat analysts’ estimates and the company’s forecast, Dallas-based Tenet said today in a statement. Earnings excluding one-time items were 52 cents a share, 15 cents lower than the average of 19 analysts’ estimates compiled by Bloomberg.

Revenue climbed 7.3 percent to $2.33 billion, as adjusted admissions rose 2.9 percent and outpatient visits increased 7.3 percent. Tenet operates 49 hospitals in 10 states and has doubled the number of its freestanding outpatient centers to 117 from four years ago.

“Their outpatient strategy is clearly paying off,” Sheryl Skolnick, an analyst at CRT Capital Group LLC in Stamford, Connecticut, said in a telephone interview. “It’s a good quarter, not a great quarter.”

Tenet rose less than 1 percent to $37.87 at the close of New York trading. The shares have gained 64 percent in the past 12 months.

“This marks another quarter where our volumes were among the strongest in the industry, with only a minimal contribution from the flu,” Chief Executive Officer Trevor Fetter said in an e-mailed statement.

Forecast Reiterated

Tenet reaffirmed its 2013 forecast for adjusted Ebitda of $1.325 billion to $1.425 billion. Fourth-quarter revenue climbed 7.3 percent to $2.33 billion.

“It’s nice to see the company reiterate guidance,” said Brian Tanquilut, an analyst at Jefferies & Co. in Nashville, Tennessee, in a telephone interview.

Uninsured and charity admissions rose 1.1 percent, causing higher bad debt expenses, the company said. The increase came as the influenza season reached elevated levels in December, a month earlier than usual. HCA Holdings Inc. and Community Health Systems Inc., the largest publicly traded U.S. hospital companies, also reported higher admissions for the quarter because of the flu.

The adjusted per-share result was hurt by “impairments” and “litigation and investigation costs,” as well as depreciation expenses, Rick Black, a spokesman at Tenet, said in an e-mailed statement. He said the depreciation costs are “good news” because the company is ahead of schedule with installing information technology systems at the company’s hospitals.

Net Income

Fourth-quarter net income was $49 million, or 45 cents a share, compared with a net loss of $76 million, or 70 cents, a year earlier when the company repaid debt early.

Shareholders are looking ahead to next year when the effects of the federal health-care overhaul kick in, said Whit Mayo, an analyst with Robert W. Baird & Co. in Nashville.

“Investors are 100 percent focused on 2014,” Mayo said in a telephone interview. “There are so many unknowns about how all of this will work.”

The Congressional Budget Office estimates that 27 million Americans who would otherwise be uninsured will eventually gain coverage under the overhaul. Tenet will benefit from the expansion because the company has operations in states with a large number of patients without insurance, Fetter said on a conference call today.

“As our expectations become more tangible on reform, we see a lot of upsides in our markets,” Fetter said.

The number of U.S. flu cases began to rise in November, according to the Atlanta-based Centers for Disease Control and Prevention. The virus attacks for about three months, moving through the population and leaving fever, muscle aches and malaise so severe many patients are bedridden for a week or two.

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