Tenet Earnings: Robust Utilization Trends and Expanded Services Support Our Valuation Increase

No-moat Tenet ended the year with strong fourth-quarter results above our expectations. We are raising our fair value estimate to $104 per share from $95 mainly due to higher margin projections as the company continues to expand its high-acuity service lines and improve its operating efficiency. We applaud Tenet’s efforts to enhance its credit profile through hospital portfolio optimization and debt retirement. In our view, despite the 60% stock price rally since last November, Tenet’s shares remain moderately undervalued.