Against a backdrop of plunging hospital stocks last week, Tenet Healthcare Corp. reported a rosy earnings picture for its second quarter, highlighted by a 30% jump in profits and a brighter-than-anticipated outlook for the rest of the year.
"Clearly the strategies we put in place nearly two years ago are working," said Jeffrey Barbakow, Tenet's chairman and chief executive officer, during a conference call with analysts on Jan. 4.
He noted that the quarter ended Nov. 30, 2000, marks the fourth consecutive reporting period in which the Santa Barbara, Calif.-based chain posted earnings-per-share growth of 20% or more. Barbakow also said Tenet's earnings for fiscal 2001 would likely grow by 20% or more, higher than the "mid-teens" percentage growth company officials had anticipated last October.
The for-profit company, which owns 111 hospitals in 17 states, reported its quarterly net income jumped 29.6% to $175 million, or 54 cents per share, compared with $135 million, or 43 cents per share, in the year-ago quarter.
Tenet posted earnings of 54 cents per share from operations, well ahead of analysts' consensus estimate of 50 cents per share, according to First Call/Thomson Financial, which tracks earnings performance.
Tenet's net operating revenue rose nearly 5% to $2.92 billion, compared with $2.78 billion in the year-ago quarter.
Deborah Lawson, a healthcare analyst with Salomon Smith Barney in New York, called Tenet's earnings "terrific."
"If you looked at each component of what we tend to look at, it was across-the-board impressive," she said. "I guess if I had to single something out that was most impressive, it was continued strong volume growth."
Tenet said it is trying to drive volume trends by beefing up its "core service lines," such as cardiology, orthopedics and neurology.
Despite having fewer hospitals, admissions to Tenet hospitals rose 0.8% in the most recent quarter, with same-facility admissions rising 4.2%.
Despite the company's optimistic outlook, its stock price dropped nearly 6%, or $2.44, to close at $39 after the earnings were announced. Lawson and other analysts attributed the drop to the Federal Reserve Bank's announcement that it would drop interest rates, which caused investors to shift money back into other industry sectors.