TD Cowen starts Tenet Healthcare with buy, $175 target

On Wednesday, TD Cowen initiated coverage of Tenet Healthcare (NYSE:THC), assigning a Buy rating to the company’s stock and setting a price target of $175. The new target reflects a positive outlook on the company’s strategic direction and performance. With a current market capitalization of $12.77 billion and a P/E ratio of 4.07x, InvestingPro data shows the company maintains strong financial metrics, including an impressive 46.57% return over the past year.

The healthcare provider has been reshaping its business structure since 2021, engaging in a series of divestitures and operational improvements. Analysts at TD Cowen highlighted that Tenet Healthcare has sold off 19 hospitals and significantly reduced its debt to a 3.2x debt/EBITDA-NCI ratio. Concurrently, the company has expanded its consolidated facilities by 46% at its United Surgical Partners International (USPI) division. InvestingPro analysis reveals the company maintains a "GREAT" overall financial health score of 3.18, with particularly strong marks in profitability metrics.

The firm’s analysts believe that Tenet Healthcare’s management team will persist in their strategic efforts to grow the company. This includes adding Ambulatory Surgery Centers (ASCs) and incorporating higher acuity procedures into their service offerings. The analysts’ confidence in the company’s strategy and execution is encapsulated in the Buy rating and the $175 price target.

The price target is based on a 7.7x multiple of the firm’s 2026 EBITDA-NCI estimate, indicating a long-term perspective on the company’s valuation. The analysts’ comment accompanying the initiation underscores their belief in the ongoing transformation: "We believe management will continue to execute on their strategy of adding ASCs and higher acuity procedures across the portfolio."

Tenet Healthcare’s strategic moves since 2021 have positioned the company to focus on higher-margin services and more efficient operations. The endorsement from TD Cowen suggests that these efforts are being recognized by market observers and may influence investor sentiment toward the healthcare company’s stock.

In other recent news, Tenet Healthcare Corporation reported its fourth-quarter 2024 earnings, revealing a mixed performance. The company exceeded earnings per share (EPS) expectations with $3.44, surpassing the anticipated $2.95, but fell short on revenue, posting $5.07 billion against the expected $5.17 billion. Despite this, Tenet Healthcare’s full-year net operating revenues reached $20.7 billion, with a consolidated adjusted EBITDA of $4 billion, reflecting a 13% growth over the previous year. Cantor Fitzgerald maintained its Overweight rating on Tenet, with a price target of $177, citing the company’s challenges in navigating policy uncertainties. Meanwhile, Raymond (NSE:RYMD) James adjusted its price target from $195 to $185, noting Tenet’s strong performance in the Ambulatory Surgery Center segment, which outperformed expectations. KeyBanc also retained its Overweight rating with a $185 price target, highlighting Tenet’s solid results and debt reduction efforts. Barclays (LON:BARC) revised its price target to $161 from $190, maintaining an Overweight rating and acknowledging Tenet’s 4% EBITDA beat for the quarter. Overall, these developments underscore the complexities Tenet Healthcare faces, including policy risks and market reactions to their financial performance.

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