Hospitals Erase $8 Billion as Tenet, HCA Results Disappoint

(Bloomberg) — Stocks of hospital operators are plunging on Friday after earnings reports from Tenet Healthcare Corp. and industry-giant HCA Healthcare Inc. underwhelmed investors, wiping out more than $8 billion in market value across the group.

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Tenet plunged by as much as 32%, the most intraday since November 2008, after its net operating revenue guidance for the year was trimmed, taking the outlook below the average view on Wall Street. HCA fell as much as 15% after its third-quarter results included revenue that narrowly missed consensus expectations. Peers Universal Health Services Inc. and Community Health Systems Inc. are following them lower, declining as much as 12% and 21% respectively.

Some weakness was expected, but particularly Tenet’s results were “exceedingly weak,” Raymond James analyst John Ransom writes.

Hospitals have faced challenges this year over receding Covid-19 patients and the trajectory of the recovery of non-Covid procedure volumes that were expected to rebound as the pandemic ebbs. Elevated labor costs due to contract staffing have also been hurdles. When the pair of operators posted their second-quarter earnings in July, the sector was buoyed by the results that came in stronger than analysts expected amid worries over weaker demand.

Tenet’s shares are getting hit by operational guidance that falls below estimates, writes buy-rated Citi analyst Jason Cassorla. Still, Cassorla says a big decline would offer investors an opportunity in 2023.

Meanwhile, SVB Securities analyst Whit Mayo, who has an outperform rating on HCA, said Friday that investors should snap up the stock on weakness, as the company’s results demonstrated more good than bad.

See: Abbott Shares Decline as Investors Seek Growth Beyond Covid

(Updates to add latest trading and additional analyst commentary.)