Asset Management & Market Research

THC - some stocks still shining in this tape !

Yesterday, on the earnings call for Tenet Healthcare (THC), chief executive officer Trevor Fetter called the hospital chain’s second quarter performance, which was driven largely by newly insured patients under President Obama’s Affordable Care Act,  “the best” he could remember.

Here’s what Forbes had to say about the call and Tenet’s earnings. We follow that with a look at the shares from a technical perspective …

In an hour-long conference call this morning to discuss second-quarter earnings, Fetter said patients who obtained coverage under the health law contributed to one-third of the company’s adjusted admissions growth. He described Tenet’s performance as among the best he could remember, which is saying something given Fetter has held various roles at the investor-owned hospital operator since the mid-1990s.

“We drove the strongest growth in commercial volumes in more than a decade and we achieved rates of growth in admissions, outpatient visits, surgeries and emergency department visits that are among the best I can remember,” Fetter told analysts in the conference call.


President Obama

The expansion of health benefits to uninsured Americans has been a boon to insurers, and providers of medical care. Hospitals, in particular, have been hit hard due in part to the slow economy, but also due to changes in how insurers pay hospitals, encouraging wellness and outpatient care to keep patients away from inpatient settings.

But Tenet executives this morning outlined a bullish scenario they said “improved sequentially from month to month” as more Americans gained coverage beginning Jan. 1 of this year.  Though executives wouldn’t predict whether second-quarter growth would replicate in future quarters, they said volumes grew again in July, which is the first month of the third quarter. Fetter spoke this morning following yesterday’s release of the second-quarter earnings report, which can be seen here. 

Tenet provided a good snapshot into growth prospects under the health care law given the company operates 80 hospitals and more than 190 outpatient centers.

As illustrated in the weekly chart below, not only is the news flow and business backdrop improving for Tenet (THC), but so are the technicals.  After  going virtually nowhere from 2006 to 2013, THC shares rallied hard in the early part of 2013.   Over the last 17 months shares have been in a wide consolidation between $ 38 and $ 50. Three weeks ago shares finally broke out above this resistance area (red lines).  The length of the consolidation, before subsequent breakout, suggests a large move is in the offing.  We suggest the next upside target for THC shares may now challenge their peak from 2003, near $ 80.  Current high street targets are $ 66.

Tenet Healthcare (THC) – Weekly Chart


Author: Kevin Lane

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