THE HEDGEYE EDGE
The Health Care team at Hedgeye maintains its LONG thesis for Tenet Healthcare (THC). For the near-term, we feel confident that the company will report in-line with top-line revenues, but above consensus for both EPS and EBITDA numbers.
These conclusions result from two key themes quintessential to our thesis. The first is the continuation of the larger group’s 2Q trend. While we do expect in-patient to remain somewhat soft, out-patient trends continue to post positive numbers on the heels of a utilization uptick. Most recently, outpatient remained solid with visits trending positively with a 5.3% growth in visits and 7.2% year-over-year growth in revenues,
Secondly, our team continues to see positive trends from a shift to higher acuity. Surgery growth remains solid with 4.9% growth and 6.6% growth in IP pricing. These themes paired with the team’s larger thesis reiterates our LONG position for THC.
Despite Tenet’s recent struggles, our data continues to advocate for a price target well into the $30s based on our 2020 EBITDA estimate. Our labor data accurately forecasts increased utilization of health care services. The accelerating labor trend of 12% in July versus 9% in June signals higher same- store adjusted admissions at THC. That conclusion was recently corroborated by JPM's regular hospital survey results. We also believe the new ASC rule for high acuity cases will be a catalyst for net market share gain through the company’s partnership with USPI.
Thinking past just the near-term, our team will continue to track the aforementioned themes and update models to reflect new results.
ONE-YEAR TRAILING CHART
