Leerink Partners Reiterates Market Perform on Tenet Healthcare (THC); Cuts EBITDA Estimates
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Leerink Partners reiterated a Market Perform rating and $22.00 price target on Tenet Healthcare (NYSE: THC) following the company's 3Q earnings report. Net revenues of ~$4.8B beat consensus estimates by 1.5% while EBITDA of $570MM missed by 1.1%. Leerink cut 2016 estimates for EBITDA from $2,463MM to $2,431MM. 2017 estimates for EBITDA were cut from $2,589MM to $2,560MM as compared to consensus of $2,582MM.
Analyst Ana Gupte commented, "We remain neutral on THC post-3Q where the company posted an OK quarter with a modest EBITDA miss from its money-losing health plan business. Hospital ED and Outpatient were weak offset by volumes and acuity in the Ambulatory business while Conifer performance was solid. The updated outlook was driven by a $5-10MM hit to EBITDA from Hurricane Matthew in 4Q, a $5MM loss in 3Q16 and projected $15MM in 4Q loss in the health plan offset by a $20MM increase in the outlook for the ASC business and a $5MM increase in the Conifer outlook. While we see the strategy on mix shifting to lower cost sites of service that are enjoying secular growth, we expect EBITDA to be weak till the business mix works through the pricing headwind from this mix shift. Furthermore, the uncertainty of Repeal and Replace post-election will remain a headwind with high-single to low-double-digit EBITDA exposure from bad debt and volume tailwinds with ObamaCare, though likely repeal of DSH cuts and tailwinds of Corporate tax reform are an offset in 2018 and beyond. Leverage ratio post-3Q also remains high at 5.7x. We are lowering our 2016E EBITDA from $2,463MM to $2,431MM. We revise our 2017E EBITDA from $2,589MM to $2,560MM as compared to consensus of $2,582MM. Our 2018E EBITDA increases from $2,658MM to $2,669MM. Our PT of $22 contemplates an EV to 2017E EBITDA ratio of 6.3x."
Shares of Tenet Healthcare closed at $16.14 yesterday.
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