Tenet Profit Up 45%, Beating Expectations

Hospital operator Tenet HealthCare Corp. said Wednesday that higher admissions and fees helped boost its fiscal first-quarter operating profit by 45%, beating analysts’ upwardly revised forecasts.

“The first quarter of fiscal 2002 marks our strongest quarterly growth ever in income from operations,” Chief Executive Jeffrey Barbakow said.

The Santa Barbara-based company said operating income totaled $224 million, or 67 cents a share, in the quarter ended Aug. 31, up from $154 million, or 48 cents, a year earlier. Revenue grew 14% to $3.30 billion.

Tenet said in September that it expected earnings of 65 cents to 67 cents for the quarter. After that forecast, analysts’ consensus earnings estimate rose to 64 cents from 61 cents, according to Thomson Financial/First Call.

The company said admissions to its 114 hospitals increased 5.9%, and admissions to facilities open at least a year rose 3.5%.

Tenet said it expects earnings to rise 25% in the current fiscal year, based on pricing and admissions trends.

Tenet previously expected earnings growth in the high teens, but the company is getting a better sense of what managed-care firms will pay, Gerard Klauer Mattison analyst Andreas Dirnagl said.

Tenet, the nation’s second-biggest hospital chain, said it continues to obtain good price increases in negotiations with managed-care companies, with typical increases of 6% or more.

Barbakow said the economic slowdown will have little effect on the company’s operations.

Barbakow said in a conference call that the company plans to make additional investments in facilities, such as diagnostic labs and emergency rooms.

He said Tenet will be selective in acquisitions to focus on markets where the company could be the No. 1 or No. 2 health-care provider.

Tenet shares rose to a record $61 early Wednesday after the firm reported its results, but the stock ended down 70 cents at $58.40 on the New York Stock Exchange. The stock is up 31% year to date.