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TENET HEALTHCARE CORP (THC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered broad-based strength: adjusted diluted EPS $4.36 (+35% YoY), consolidated Adjusted EBITDA $1.163B (+13.6% YoY; 22.3% margin), and free cash flow $642M, driven by same-store admissions growth, higher acuity, favorable payer mix, and disciplined cost control .
  • Results significantly exceeded S&P Global consensus: EPS beat by ~$1.23 and revenue beat by ~$0.08B; hospital margins expanded to 17.5% and USPI margins remained strong at 38.2% . Consensus values marked with * are from S&P Global.
  • FY25 guidance was reaffirmed, with the company maintaining Adjusted EBITDA of $3.975–$4.175B and net operating revenues of $20.6–$21.0B; management added cadence color (Q2 EBITDA expected to be 24–25% of FY) and reiterated capital priorities (USPI M&A baseline ~$250M, active buybacks) .
  • Key stock catalysts: sustained outperformance vs consensus, hospital margin expansion, USPI acuity-driven rate mix tailwinds, and capital deployment (ASC acquisitions and buybacks) against a deleveraged balance sheet (net debt/Adj. EBITDA 2.46x) .

What Went Well and What Went Wrong

What Went Well

  • USPI acuity and pricing: USPI Adjusted EBITDA $456M (+15.7% YoY) on 9.1% net revenue per case growth; management highlighted “12% growth in total joint replacements in the ASCs over the prior year” and a healthy pipeline for de novos/M&A .
  • Hospital margin expansion: Hospital Adjusted EBITDA $707M (+12% YoY), margin 17.5% (+310 bps YoY), supported by 4.4% same-hospital admissions and +2.8% revenue per adjusted admission; labor discipline drove SWB improvement and contract labor reduction .
  • Cash generation and capital deployment: Free cash flow $642M; $348M buybacks (2.63M shares) in Q1; net debt/Adj. EBITDA down to 2.46x .

What Went Wrong

  • Consolidated revenue dipped YoY due to 2024 hospital divestitures: Q1 net operating revenues fell 2.7% YoY to $5.223B despite stronger same-store performance .
  • USPI volumes were down while acuity/mix drove rates: system-wide surgical cases -2.1% YoY, reflecting portfolio reshaping toward higher acuity and strategic movement away from low-acuity procedures .
  • Management withheld FY guidance raise despite beat: reiterated FY25 ranges citing “early in the year” and policy uncertainty; $35M of expected TN Medicaid supplemental revenue not yet recorded in Q1 .

Financial Results

Consolidated Performance vs Prior Periods and Estimates

MetricQ3 2024Q4 2024Q1 2025
Net Operating Revenues ($USD Billions)$5.122 $5.072 $5.223
Adjusted EBITDA ($USD Billions)$0.978 $1.048 $1.163
Adjusted EBITDA Margin (%)19.1% 20.7% 22.3%
Adjusted Diluted EPS ($)$2.93 $3.44 $4.36
Diluted EPS (GAAP) ($)$4.89 (gain on sale) $3.32 $4.27
Revenue Consensus Mean ($USD Billions)*$5.053$5.170$5.142
Primary EPS Consensus Mean ($)*$2.371$2.832$3.133
Actual vs Consensus (Revenue)Beat by ~$0.07BMiss by ~$0.10BBeat by ~$0.08B
Actual vs Consensus (EPS)Beat by ~$0.56Beat by ~$0.61Beat by ~$1.23

Consensus values marked with * retrieved from S&P Global.

Segment Breakdown – Q1 2025

SegmentNet Operating Revenues ($USD Millions)Adjusted EBITDA ($USD Millions)Adjusted EBITDA Margin (%)
Ambulatory Care (USPI)$1,194 $456 38.2%
Hospital Operations & Services$4,029 $707 17.5%
Total$5,223 $1,163 22.3%

KPIs and Operating Metrics

KPIQ3 2024Q4 2024Q1 2025
Same-hospital admissions YoY+5.2% +5.0% +4.4%
Revenue per adjusted admission YoY+3.3% +0.6% +2.8%
USPI same-facility system-wide cases YoY+1.0% +0.1% -2.1%
USPI net revenue per case YoY+7.6% +8.5% +9.1%
Consolidated SWB as % of net revenues43.3% 41.3% 40.6%
Contract labor as % of SWB (consolidated)2.2% 2.1% 2.0%
Exchange admissions growth YoY (hospital)+58% N/A+35%
Exchange revenue as % of consolidated revenueN/AN/A~7%
Free Cash Flow ($USD Millions)$829 $(661) Q4 / $1,116 FY $642
Cash from Operations ($USD Millions)$1,045 $(331) Q4 / $2,047 FY $815

Guidance Changes

MetricPeriodPrevious Guidance (as of Q4 2024 8-K)Current Guidance (Q1 2025 8-K)Change
Net Operating Revenues ($B)FY 2025$20.6–$21.0 $20.6–$21.0 Maintained
Adjusted EBITDA ($B)FY 2025$3.975–$4.175 $3.975–$4.175 Maintained
Adjusted EBITDA Margin (%)FY 202519.3–19.9% 19.3–19.9% Maintained
Diluted EPS ($)FY 2025$10.95–$12.47 $11.37–$12.92 Raised
Adjusted Diluted EPS ($)FY 2025$11.74–$12.84 $11.99–$13.12 Raised
Weighted Avg Diluted Shares (mm)FY 2025~95 ~93 Lowered
Net Cash from Ops ($B)FY 2025$2.50–$2.85 $2.50–$2.85 Maintained
Free Cash Flow ($B)FY 2025$1.80–$2.05 $1.80–$2.05 Maintained
Capex ($B)FY 2025$0.70–$0.80 $0.70–$0.80 Maintained

Additional cadence and assumptions:

  • Q2 2025 EBITDA expected to be 24–25% of FY at the midpoint; USPI Q2 EBITDA 24.2–25.25% of FY .
  • Outlook includes ~$35M net revenues from Tennessee Medicaid supplemental programs; none recognized in Q1 pending approval .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Labor discipline and marginsSWB down, contract labor falling; hospital margins improved (Q3/Q4) SWB 40.6% of revenue, contract labor 2% of SWB; hospital margin 17.5% Improving
USPI acuity and rate mix+7.6% (Q3) and +8.5% (Q4) net revenue/case; total joints +19% (Q3) +9.1% net revenue/case; total joints +12% Positive, sustained
Exchanges (HIX)Exchange admissions +58% YoY (Q3); broad networks contracting Exchange admissions +35% YoY; ~7% of total revenue Strong, moderating growth
Policy/regulatoryTwo-midnight adoption lag; Medicaid supplemental programs; de-risked USPI via freestanding ASC rates (Q3/Q4) Reaffirmed strategy amid DC uncertainty; contingency planning “priority #4” Watchful, steady ops
Supply chain/tariffsN/AHealthTrust scale across hospital/ASC; no discrete exposure commentary changes Stable
Capital deploymentDe novos, buy-ups, large ASC acquisition in early 2024; active buybacks (Q3/Q4) Baseline ~$250M USPI M&A; plan continued buybacks Ongoing

Management Commentary

  • “We reported first quarter 2025…consolidated adjusted EBITDA of $1.163 billion…Adjusted EBITDA margin of 22.3%…demonstrates our strong growth and continued operating discipline.”
  • “USPI…generated $456 million in adjusted EBITDA…same-facility revenues grew 6.8%…highlighted by a 12% growth in total joint replacements.”
  • “Same-store hospital admissions were up 4.4%…revenue per adjusted admission up 2.8%…acuity and payer mix remained strong.”
  • “We repurchased 2.6 million shares…for $348 million…and plan to be active repurchasers…leveraging significant cash flow.”
  • “We are not altering our business strategy because of health care policy uncertainty…we will steadily execute on our growth strategies.”

Q&A Highlights

  • Guidance posture: Management acknowledged fundamental outperformance but chose not to raise FY guidance early; confirmed Q2 cadence and TN Medicaid assumptions pending approval .
  • Hospital margin drivers: SWB down >200 bps YoY in hospitals; operating discipline across labor, supplies, purchase services drove strong Q1 margins .
  • USPI rate momentum: Mix shift to higher acuity and contracting strategies underpin sustained net revenue per case growth; resyndication efforts align specialties with high-acuity services .
  • Exchange dynamics: +35% admissions growth in Q1; ~7% of consolidated revenues; broad network contracting strategy supports durable volume .
  • Policy/tariffs: Active HealthTrust engagement across segments; no incremental supply chain exposure commentary; contingency planning remains secondary to growth and cost control .

Estimates Context

  • Q1 2025: Actual adjusted diluted EPS $4.36 vs consensus $3.13*; revenue $5.223B vs consensus $5.142B*: both beats.
  • Q4 2024: Actual adjusted diluted EPS $3.44 vs consensus $2.83* (beat); revenue $5.072B vs $5.170B* (miss).
  • Q3 2024: Actual adjusted diluted EPS $2.93 vs consensus $2.37* (beat); revenue $5.122B vs $5.053B* (beat).
MetricQ3 2024Q4 2024Q1 2025
Primary EPS Consensus Mean ($)*2.3712.8323.133
Revenue Consensus Mean ($USD Billions)*5.0535.1705.142
Actual Adjusted Diluted EPS ($)2.93 3.44 4.36
Actual Revenue ($USD Billions)5.122 5.072 5.223

Consensus values marked with * retrieved from S&P Global.

Implication: Near-term estimate revisions should trend upward for EPS (particularly hospitals) and modestly for revenue, reflecting margin expansion and USPI rate/mix tailwinds .

Key Takeaways for Investors

  • Hospital margin story is intact and improving: 17.5% segment margin with disciplined labor and cost control; expect continued operating leverage if volumes remain robust .
  • USPI remains a structural growth engine: sustained rate/mix tailwinds and high-acuity expansion support outsized EPS leverage even with flat-to-down volumes; de novo/M&A pipeline healthy .
  • Capital deployment supports TSR: strong FCF, deleveraged balance sheet (2.46x net debt/Adj. EBITDA), ongoing buybacks, and targeted ASC investments (~$250M baseline) .
  • Guidance conservative near-term: management reaffirmed FY25 ranges despite over-delivery; Q2 cadence implies continued strength; watch for potential midyear guidance updates .
  • Policy uncertainty manageable: USPI insulated by freestanding ASC rates; hospitals benefit from exchange strength and disciplined cost structure; TN supplemental Medicaid remains a monitored upside .
  • Trend analysis supports estimate momentum: EPS beats in three consecutive quarters; hospital margin expansion and USPI mix suggest upward bias to EPS forecasts.
  • Trading setup: Positive revisions, margin credibility, and buyback activity are supportive; monitor exchange volumes and any Medicaid program changes for incremental impact .

Footnotes and Sources: All company-reported data and quotes sourced from Tenet’s Q1 2025 8-K earnings release and press release and Q1 2025 earnings call transcript . Prior-quarter context from Q4 2024 8-K and call and Q3 2024 8-K and call . Consensus values marked with * retrieved from S&P Global.