Tenet Healthcare (NYSE: THC) reported Q1 EPS of $0.57, versus ($0.03) reported last year. Revenue for the quarter came in at $4.7 billion versus the consensus estimate of $4.59 billion.

“The actions we have taken to be a more efficient, agile and decisive organization have resulted in stronger financial performance,” said Ronald A. Rittenmeyer, executive chairman and CEO. “We are continuing our focus on improving quality, growth and financial results and will be exploring additional opportunities to enhance margins and shareholder returns.”

• Same-hospital net patient revenue grew 6.7%. Admissions increased 0.3%, adjusted admissions increased 0.6%, and revenue per adjusted admission increased 6.0%.
• Ambulatory Care same-facility system-wide revenue grew 2.7%, with cases up 3.2% and revenue per case down 0.5%. Surgical revenue grew 2.3%, with cases down 0.5% and revenue per surgical case up 2.8%.
• Conifer’s revenues increased 0.5% with revenue from third parties up 4.5%.
• Tenet reported net income from continuing operations available to Tenet shareholders of $98 million or $0.95 per diluted share in the first quarter compared to a net loss of $52 million or $0.52 per diluted share in the first quarter of 2017. After adjusting for certain items, which totaled $39 million or $0.38 per share in the first quarter of 2018, Tenet reported Adjusted diluted earnings per share from continuing operations of $0.57 in the first quarter of 2018 compared to an Adjusted diluted loss per share of $0.27 in the first quarter of 2017.
• Adjusted EBITDA was $665 million in the first quarter of 2018 compared to $527 million in the first quarter of 2017. Adjusted EBITDA in the first quarter of 2018 consisted of $402 million in the Hospital segment, $165 million in the Ambulatory segment and $98 million in the Conifer segment.
• Net cash provided by operating activities was $113 million compared to $186 million in the first quarter of 2017; the $73 million decrease was primarily due to an anticipated $82 million reduction in receipts related to the California Provider Fee program. Free Cash Flow was an outflow of $30 million, a decrease of $18 million when compared to an outflow of $12 million in the first quarter of 2017. Adjusted Free Cash Flow was $4 million, a $6 million decrease when compared to $10 million in the first quarter of 2017.
• 2018 Outlook has been increased to reflect net income from continuing operations attributable to Tenet common shareholders of $105 million to $180 million, Adjusted EBITDA of $2.550 billion to $2.650 billion, diluted earnings per share from continuing operations of $1.02 to $1.75 and Adjusted diluted earnings per share from continuing operations of $1.36 to $1.70.

Outlook

The Company’s revised Outlook for 2018 includes:

• Revenue of $17.9 billion to $18.3 billion,
• Net income from continuing operations available to Tenet common shareholders of $105 million to $180 million,
• Adjusted EBITDA of $2.550 billion to $2.650 billion,
• Net cash provided by operating activities of $1.245 billion to $1.550 billion,
• Adjusted Free Cash Flow of $725 million to $925 million,
• Diluted earnings per share from continuing operations available to Tenet shareholders of $1.02 to $1.75, and
• Adjusted diluted earnings per share from continuing operations available to Tenet shareholders of $1.36 to $1.70.

The Company raised the midpoint of its previous 2018 Adjusted EBITDA Outlook range by $50 million to reflect higher expectations for Conifer, primarily as a result of the business achieving improvements in its cost structure on a faster pace than previously anticipated.

The Outlook for 2018 assumes equity in earnings of unconsolidated affiliates of $160 million to $170 million, net income attributable to noncontrolling interests of $410 million to $430 million and an average diluted share count of 103 million. The Outlook for net income attributable to noncontrolling interests reflects a reduction in noncontrolling interest expense as a result of Tenet increasing its ownership in USPI from 80 percent to 95 percent, effective April 26, 2018, substantially offset by increased noncontrolling interest expense at Conifer resulting from our increased expectations for Conifer’s net income this year.

The Company’s Outlook for the second quarter of 2018 includes:

• Revenue of $4.475 billion to $4.675 billion,
• Net income from continuing operations available to Tenet shareholders ranging from a loss of $5 million to income of $10 million,
• Adjusted EBITDA of $605 million to $655 million,
• Earnings per diluted share from continuing operations available to Tenet shareholders ranging from a loss of $0.05 to earnings of $0.10, and
• Adjusted earnings per diluted share from continuing operations available to Tenet shareholders ranging from $0.15 to $0.29.

GUIDANCE:

Tenet Healthcare sees FY2018 EPS of $1.36-$1.70, versus the consensus of $0.92. Tenet Healthcare sees FY2018 revenue of $17.9-18.3 billion, versus the consensus of $18.09 billion.

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