Tenet Earnings: Strong Facility Utilization Trends Boost 2023 Outlook Again

Tenet reported robust third-quarter results that were roughly in line with our expectations. Our $95 fair value estimate remains intact, and following an over 30% decline in Tenet’s stock price since early September, shares look attractive to us. Positively, management raised its 2023 adjusted EBITDA outlook for a third time this year to between $3.365 billion and $3.465 billion related to strong facility utilization trends as well as effective cost controls. Despite our no-moat rating, we recognize Tenet’s leadership in the high-margin, fast-growing ambulatory care market, and we continue to forecast that Tenet’s return on invested capital will stay above its capital costs over the next five years.