For the last several years, Tenet Healthcare Corp. has been slowly, painfully climbing out of the hole it's been in since 2003. Over that period the company has shed more than half of its hospitals to focus on urban markets, worked to lower the number of bad patient debts it carried and gradually shaved down its massive debt load. It also weathered serious legal troubles in 2006 related to various pricing and other practices challenged by the federal government.
However, it seems some investors still don't have much trust in the hospital giant. Recently, when it posted disappointing third quarter results and adjusted its outlook down, investors pounded the stock into a powder, taking it down to $1 a share, the lowest level in its history. While this may be too harsh--one observer suggested that $2.50 is a fairer price per share--it does show how steep the road remains for Tenet. Even with Tenet's earnings before interest, taxes, depreciation and amortization (Ebitda) growing by 10 percent this year, a bad quarterly report that didn't meet the company's own guidance didn't do it any favors.
Tenet got slammed, observers say, because the problems it has are ones that are already sore spots on the street. In its filings for Q3 '08, it had to admit that commercial patient volumes were down, patient bad debt higher, supply costs up and and its Ebitda view down. It did cite gains in physician recruitment and growth in overall same-hospital admissions, but that didn't seem to be enough. Of course, investors remain worried about the real ticking time bomb--its almost $4.8 billion in long-term debt--though the company did have enough cash at the end of the third quarter ($500 million) to address the problem over the short term.
To learn more about Tenet's financial position:
- read this Dow Jones Newswire piece
Tenet turning around: Admissions grow, losses fall
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