On Thursday, Deutsche Bank (ETR:DBKGn) maintained a Buy rating on Tenet Healthcare (NYSE:THC) and increased its price target to $160 from $155. The firm highlighted Tenet's updated 2024 guidance, which forecasts $3.9 billion in EBITDA, reaching up to $3.975 billion at the high end. This projection is close to the consensus estimates for 2026, which are at $4.09 billion, indicating Tenet's rapid business transformation.
The analyst pointed out that Tenet's leverage ratio has improved to 3.3x, making the stock more attractive to a broader range of investors. This ratio is comparable to that of HCA Healthcare (NYSE:HCA), which stands at around 3x. Despite Tenet's stock appreciating approximately 94% year-to-date, which might typically cause potential investors to hesitate for a pullback, the analyst emphasized that Tenet is currently trading at 7.5 times the 2025 estimates, which is 1.7 times less expensive than HCA.
The bank noted that while it may take years for Tenet to achieve a valuation multiple similar to HCA's, due to HCA's established track record and presence within the S&P index, Tenet's EBITDA growth is expected to outpace HCA over time. This anticipated growth is attributed to Tenet's strategic capital allocation into Ambulatory Surgery Centers (ASCs).
The updated price target reflects Deutsche Bank's confidence in Tenet's continued growth trajectory and its potential for increased investment appeal.
In other recent news, Tenet Healthcare Corporation (NYSE:THC) has witnessed a series of positive developments. The company reported a 12% year-over-year increase in net operating revenues for the second quarter, reaching $5.1 billion. Its adjusted EBITDA also rose significantly to $945 million, exceeding expectations.
This performance was attributed to factors like increased revenue per case at its United Surgical Partners International (USPI) division and strong hospital volume demand.
Citi has responded to Tenet's robust performance by raising the price target to $171.00 from the previous $139.00, reaffirming a Buy rating on the company's shares. The financial firm anticipates a quarter-over-quarter increase in EBITDA, despite the typical seasonal weakness expected in the third quarter.
In response to these developments, Tenet has increased its 2024 EBITDA guidance by $300 million. The company also authorized a $1.5 billion share repurchase program as part of its capital deployment strategies. These strategies are set to focus on expanding ASCs, investing in AI technologies, and returning capital to shareholders.
Furthermore, Tenet is looking to expand services in high-demand areas, expecting long-term volume growth for their ASC division to be between 1% and 3%. These are some of the recent developments for Tenet Healthcare Corporation.
InvestingPro Insights
Adding another dimension to Deutsche Bank's positive outlook on Tenet Healthcare (NYSE:THC), InvestingPro data underscores the company's robust financial health and market performance. With a Market Cap of $14.2 billion and an attractive P/E Ratio of 5.14, Tenet stands out in the Healthcare Providers & Services industry. Notably, the company has demonstrated a strong Price Total Return of 88.26% over the last year, signaling significant investor confidence.
InvestingPro Tips also highlight Tenet's aggressive share buyback strategy and a perfect Piotroski Score of 9, which indicates exceptional financial strength. Additionally, with 5 analysts revising their earnings upwards for the upcoming period and a valuation that implies a strong free cash flow yield, Tenet's financial prospects look promising. For readers interested in deeper analysis and more tips, there are 14 additional InvestingPro Tips available, which can be accessed with a subscription. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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