Tenet Healthcare (THC) rose further into a buy zone Wednesday, ahead of the hospital operator’s second-quarter results after the close. Hospital stocks are in good health, fueled by blowout HCA Healthcare earnings early Tuesday.
Estimates: Analysts expect Tenet earnings per share to fall 13% to $1.09 a share , according to Zacks Investment Research. Revenue is seen growing 31% to $4.77 billion, the third straight quarter of accelerating growth. Year-ago Tenet earnings included $523 million in federal stimulus grants to help hospitals overcome losses and expenses related to the pandemic.
Results: Check back after the close.
THC stock rose 2.5% to 72.29 on Wednesday, clearing a 70.85 buy point from a short flat base, according to MarketSmith analysis. On Tuesday, Tenet spiked 9.1%, rebounding from its 50-day line and briefly topping the 70.85 entry.
The relative strength line for THC stock, the blue line in the charts provided, hit a multiyear high. The buy zone runs through 74.39. However, IBD recommends an options strategy to manage risk heading into earnings.
Wall Street appears to be embracing Tenet’s strategic moves. The Dallas-based company last month agreed to sell five hospitals for $900 million. That could enable Tenet to pay down debt and finance growth via its ambulatory surgery center division, which could soon drive a majority of earnings. Meanwhile, Tenet is spinning off its Conifer Health Solutions business.
As coronavirus cases tumbled as vaccinations took hold, hospitals could ramp up more-profitable elective procedures. Even as new U.S. Covid cases increase due to the delta variant, hospitalizations have risen far less because the vaccines provide strong protection against serious illness.
Since the Pfizer vaccine announcement, IBD’s Medical-Hospitals group has dramatically outperformed the S&P 500.
Other Hospital Stocks
HCA stock added 0.1% to 249.17 on Wednesday afternoon, after surging 14.4% on Tuesday.
HCA blasted through a buy zone on blowout earnings and sharply hiked guidance for the year. HCA stock offered a breakaway-gap entry. However, IBD explained in its HCA earnings article why investors might view the HCA stock entry point with caution.
Community Health Systems (CYH) added 1.8% to 15.87, after flashing a buy signal Tuesday on a rebound above its 50-day moving average. For leading stocks, the rebound after a test of its 50-day or 10-week line can provide an entry point. CYH stock, with a 92 IBD Composite Rating, would appear to qualify.
Investors could use this as an early entry on a short consolidation that should be a conventional base with a 17.14 buy point after this week.
However, Community Health Systems has earnings due after the close on July 28. Universal Health Services (UHS) is due to report after Monday’s close.
UHS stock added 0.5% to 153.90 on Wednesday after Tuesday’s 4.7% advance. But it’s hitting resistance at its 50-day line. A decisive move above the 50-day line would offer an early entry for UHS stock, which is working on its own flat base.
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