Tenet Healthcare delivered first quarter results that exceeded Wall Street’s expectations, prompting a significant positive market reaction. Management attributed the outperformance to improved labor efficiency, strong patient demand, and disciplined cost controls across its hospital and ambulatory segments. CEO Saumya Sutaria noted, “Same facility revenues grew 6.8% in the first quarter and were highlighted by a 12% growth in total joint replacements in the ASCs over the prior year.” Executives also cited a favorable payer mix and increased patient acuity, particularly within its hospital operations, as contributors to margin expansion and earnings growth.
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Tenet Healthcare (THC) Q1 CY2025 Highlights:
- Revenue: $5.22 billion vs analyst estimates of $5.15 billion (2.7% year-on-year decline, 1.3% beat)
- Adjusted EPS: $4.36 vs analyst estimates of $3.13 (39.2% beat)
- Adjusted EBITDA: $1.16 billion vs analyst estimates of $995.3 million (22.3% margin, 16.9% beat)
- The company reconfirmed its revenue guidance for the full year of $20.8 billion at the midpoint
- Management raised its full-year Adjusted EPS guidance to $12.56 at the midpoint, a 2.2% increase
- EBITDA guidance for the full year is $4.08 billion at the midpoint, in line with analyst expectations
- Operating Margin: 18.1%, down from 61.2% in the same quarter last year
- Same-Store Sales rose 2.9% year on year (1.8% in the same quarter last year)
- Market Capitalization: $15.61 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Tenet Healthcare’s Q1 Earnings Call
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Stephen Baxter (Wells Fargo) asked about any nonrecurring items in Q1 and the drivers of higher revenue per case at USPI. CEO Saumya Sutaria cited improved contracting, higher acuity, and service mix changes, with no material one-time items beyond Medicaid supplementals.
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Greg Hinenbach (Morgan Stanley Investment) questioned the M&A pipeline for ambulatory centers. Sutaria responded that the pipeline remains healthy and the company expects to meet or exceed its $250 million investment target, focusing on centers that support service diversification.
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Joanna Gajuk (Bank of America) inquired about margin outperformance in the hospital segment. Sutaria and CFO Sun Park attributed it to expense discipline, operational efficiencies, and improved staffing, rather than any unusual items.
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Ryan Langston (TD Cowen) asked about further potential for labor cost improvements. Sutaria explained the focus is now on retention and recruitment, stating contract labor is at a sustainable level, with future gains expected from building a stable workforce.
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Ben Hendrix (RBC Capital Markets) sought clarity on the persistence of strong ambulatory rate growth. Sutaria indicated continued momentum is expected as the company shifts to higher-acuity procedures and leverages payer contracting advantages.
Catalysts in Upcoming Quarters
In coming quarters, our team will be watching (1) the pace of new ambulatory center openings and the impact of M&A activity on segment growth, (2) ongoing progress in labor recruitment and retention strategies as Tenet seeks to limit wage pressure and maintain care quality, and (3) any developments in federal healthcare policy or reimbursement models that could affect hospital and ASC operations. We will also monitor execution on capital deployment priorities, including share repurchases and debt management.
Tenet Healthcare currently trades at $168.01, up from $123.77 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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