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Tenet 4th-Quarter Profit Up 40%, Beating Forecasts

July 12, 2001|From Bloomberg News

Tenet Healthcare Corp. said Tuesday that fiscal fourth-quarter profit rose 40%, beating estimates, as the second-largest U.S. hospital chain treated more patients and got bigger payments from insurers. Its stock rose 6%.

Profit from operations rose to $225 million, or 68 cents a share, in the quarter ended May 31, from $160 million, or 51 cents, a year earlier, the company said. Revenue rose 10% to $3.21 billion, from $2.91 billion.

Santa Barbara-based Tenet has controlled costs, raised prices for managed-care insurers and won higher payments from Medicare, the government health insurance program for the elderly and disabled. The company said patient admissions rose 5.5% as it invested to expand profitable medical services such as cardiology and neurology that are used mostly by people older than 50.

"This is, relative to expectations, one of the strongest performances we've seen in a while," said Merrill Lynch & Co. analyst Albert Rice, who has a "near-term buy" rating on the shares. "They're setting the bar high for the rest of the industry."

Tenet was expected to earn 62 cents a share, the average estimate of analysts surveyed by First Call/Thomson Financial.

Tenet's shares rose $3.24 to close at $54.99 on the New York Stock Exchange. They have risen 23% this year.

Tenet said it expects percentage growth in earnings per share in at least the high teens in fiscal 2002 and growth in the mid- to high teens over the next several years.

The company said admissions rose 10% for patients 51 to 60, an age group Tenet has targeted in its capital spending.

Tenet's capital investments are paying off, said SG Cowen Securities Corp. analyst Kemp Dolliver.

"They've been active in adding services and adding doctors in hospitals where it's made sense--particularly in the high-revenue areas such as cardiology and orthopedics," said Dolliver, who has a "strong buy" rating on the shares.

Tenet said revenue per admission--an indication of increases in prices for insurers--rose 9.9% in the quarter.

Under Chief Executive Jeffrey Barbakow, Tenet has sold unprofitable hospitals to invest in profitable ones in such markets as Southern California and southern Florida. Tenet also has cut costs by hiring contractors for cafeterias and other functions.

Tenet will consider buying hospitals that can add to earnings in markets where it is the biggest or second-biggest hospital operator, Barbakow told investors Wednesday in a conference call. Tenet bought two hospitals in June and agreed to buy two others.

Tenet, which owns 114 hospitals, is typically the first hospital company to report earnings.

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