On Friday, shares of hospital chain operator Tenet Healthcare (THC) surged, rising 16.8% as of 12:53 p.m. ET. The sharp increase followed the company’s release of its fiscal 2025 second-quarter earnings after the market closed on Thursday, with all key metrics beating market expectations. The company also raised its full-year guidance, effectively alleviating recent investor concerns over the industry outlook.
In the three months ended June, Tenet Healthcare reported revenue of $5.63 billion and adjusted earnings per share of $6.12. This performance marked significant improvements from $5.27 billion in revenue and $4.02 in EPS in the same period last year, while also substantially surpassing analyst estimates of $5.43 billion in revenue and $4.26 in EPS.
Chief Executive Officer Saum Sutaria stated: “We are proactively responding to current industry dynamics through excellent operational execution, continued investment in innovation, and an unwavering focus on higher-acuity medical services to sustain growth, margins, and substantial free cash flow.”
Earlier this month, competitor HCA Healthcare lowered its full-year profit guidance due to an increase in uninsured patient volume, which had placed pressure on hospital sector stocks, including Tenet Healthcare. However, Tenet not only delivered strong second-quarter results but also raised its full-year earnings expectations.
The company now projects fiscal 2026 revenue in the range of $21.9 billion to $22.5 billion, up from its previous forecast of $21.5 billion to $22.3 billion, and also above analyst estimates of just under $22.0 billion. Adjusted EBITDA guidance was also raised to $4.83 billion to $5.03 billion, compared with the prior range of $4.485 billion to $4.785 billion.
Tenet Healthcare operates an extensive network of hospitals and outpatient surgical centers across the United States, covering both traditional hospital operations and ambulatory care. United Surgical Partners International (USPI) serves as its key outpatient platform, operating hundreds of ambulatory surgical centers across more than 30 states.
In the quarter, the ambulatory care segment delivered particularly strong performance, with net operating revenue rising 11.3% to $1.27 billion, and adjusted EBITDA increasing 11.4% year-over-year. Although USPI surgical volume edged down 0.6%, revenue per case improved significantly, driven by a shift toward higher-acuity procedures such as complex joint replacements. The hospital operations segment posted modest revenue growth of 0.9% to $4.0 billion, while adjusted EBITDA grew 25% year-over-year. Same-hospital inpatient volume increased 1.6%, and revenue per adjusted admission rose 5.2%, though outpatient volume declined 3.2%, emergency room visits fell 4.7%, and inpatient surgical volume decreased 1.7%. The hospital segment margin expanded from 12.6% to 15.6%, aided in part by a retroactive Medicaid payment of $79 million.
The company generated free cash flow of $743 million, up 23.4% year-over-year; year-to-date free cash flow reached $1.39 billion, benefiting from margin improvement and disciplined capital expenditure management. Operating cost control showed notable progress, with wages, salaries, and benefits as a percentage of revenue declining from 42.4% to 41.0%. The company returned significant capital to shareholders through share repurchases, buying back 4.6 million shares in the second quarter at a cost of $747 million, and on July 22 authorized an expansion of its repurchase program to $1.5 billion. As of June 30, the company held $2.6 billion in cash.
Based on operational improvements and margin expansion, management raised its full-year fiscal 2025 guidance: adjusted EBITDA is now expected to reach $4.4 billion to $4.54 billion, adjusted EPS is projected at $15.55 to $16.21, free cash flow is forecast at $2.025 billion to $2.275 billion, and GAAP revenue is estimated at $20.95 billion to $21.25 billion.
However, potential risks facing the company include: the impact of one-time factors in recent margin improvement such as the retroactive Medicaid payment, modest declines in surgical and outpatient volumes, labor cost pressures, and regulatory policy changes surrounding Medicaid funding. In addition, THC currently does not pay dividends.
