Earnings call transcript: Tenet Healthcare beats Q1 2026 EPS expectations

Tenet Healthcare Corporation (THC) reported a robust performance for the first quarter of 2026, significantly beating earnings expectations with an EPS of $4.82 compared to a forecast of $4.16, marking a 15.87% surprise. Despite a slight revenue miss, the market reacted positively, with the stock price increasing by 1.76% post-announcement and continuing to rise in premarket trading.

Tenet Healthcare’s overall performance in Q1 2026 was strong, particularly in EPS, which outperformed market expectations. The company’s disciplined operations and strategic focus on high-acuity services helped it navigate a challenging environment characterized by payer mix shifts and insurance enrollment uncertainties. The healthcare provider’s operational efficiency is evident in its high adjusted EBITDA margin and significant free cash flow generation.

Tenet Healthcare’s EPS of $4.82 surpassed the forecasted $4.16 by 15.87%, reflecting strong operational performance. However, revenue came in at $5.37 billion, slightly below the expected $5.39 billion, a miss of 0.37%. Despite this, the significant EPS beat overshadowed the revenue shortfall, contributing to positive market sentiment.

Following the earnings announcement, Tenet Healthcare’s stock increased by 1.76%, closing at $183.27. In premarket trading, the stock continued to rise, reaching $184, reflecting investor confidence in the company’s earnings performance. This movement contrasts with the broader market trends, indicating specific investor optimism towards Tenet Healthcare.

Looking ahead, Tenet Healthcare has projected EPS forecasts for the upcoming quarters, with expectations of $4.15 for Q3 2026 and $4.82 for Q4 2026. The company continues to focus on expanding its high-acuity services and leveraging AI-driven initiatives to improve operational efficiencies.

CEO Ron Rittenmeyer remarked, "Our strong first-quarter results demonstrate our disciplined operations and the effectiveness of our strategic initiatives. We remain committed to enhancing our service offerings and operational efficiencies to drive sustainable growth."

During the earnings call, analysts inquired about the company’s strategies to mitigate revenue pressures and the impact of external disruptions on operations. Executives highlighted their proactive cost management and strategic focus on high-acuity services as key factors in maintaining strong performance.

Tenet Healthcare’s Q1 2026 results underscore its operational strength and strategic focus, positioning it well for future growth despite minor revenue challenges.

Operator: Good morning, and welcome to Tenet Healthcare’s 1st quarter 2026 earnings conference call. After the speaker remarks, there’ll be a question and answer session for industry analysts. At that time, if you’d like to ask a question, please press star one to enter the question queue. Tenet respectfully asks that the analysts limit themselves to one question each. I’ll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

Andrew Mok, Analyst, Barclays Bank6: Good morning, everyone, and thank you for joining today’s call. I am Will McDowell, Vice President of Investor Relations. We’re pleased to have you join us for a discussion of Tenet’s first quarter 2026 results, as well as a discussion of our financial outlook. Tenet senior management participating in today’s call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer, and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation which has been posted to the investor relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management’s expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information.

Investors should take note of the cautionary statement slide included in today’s presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I’ll turn the call over to Saum.

Andrew Mok, Analyst, Barclays Bank1: All right. Thank you, Will, and good morning, everyone. In the first quarter, we reported net operating revenues of $5.4 billion and consolidated adjusted EBITDA of $1.16 billion, which represents an adjusted EBITDA margin of 21.6%. We are pleased with the start to the year, performing above our previously provided expectations. As anticipated towards the end of last year, the operating environment is dynamic. There are payer mix shifts, seasonal effects, and insurance enrollment uncertainty in the exchanges and Medicaid that impact demand. Despite these challenges, we delivered a clean quarter characterized by disciplined operations, benefits from execution on our previously described expense opportunities, stable volumes despite headwinds, and as a result, significant free cash flow generation.

USPI generated $484 million in adjusted EBITDA, which represents six percent growth over the first quarter of 2025 and a robust 22% of our full year 2026 adjusted EBITDA guidance. We are pleased with USPI’s start to the year as we set an aggressive EBITDA target as a percent of the full year for the first quarter that we were able to exceed. We have seen a pattern over the last few years with a modest shift towards an increased distribution of cases and therefore earnings into the first quarter. Given our focus on acuity, same facility revenues grew five point three percent at USPI, highlighted by double-digit same-store volume growth in total joint replacements in the ASCs over prior year. Our operations in the first quarter were somewhat impacted by two major winter storms and uncertainty from vendor cyberattacks.

However, our operating teams managed through them and were able to reschedule many of the procedures, lessening the overall impact in the quarter. We have a robust pipeline of assets interested in joining USPI this year. As such, we’ve had a particularly strong start to the year, investing $125 million in the first quarter to acquire seven ASCs. Additionally, we have commenced patient care at three de novo centers. This represents half of our targeted full-year spend already completed in the first quarter. Turning to our hospital segment, first quarter 2026 adjusted EBITDA was $678 million, which was nicely above our expectations and represented 27.5% of our full year 2026 adjusted EBITDA guidance.

We reported 16.7% EBITDA margins in the quarter, which were driven by disciplined expense management and growth initiatives, which offset the expected impacts of unfavorable payer mix and re-reductions in exchange enrollment. The results in the quarter reflect no significant changes in supplemental Medicaid program revenues compared to our original expectations. We have seen declines in exchange coverage, with same-store exchange admissions down about 10% compared to first quarter 2025, but not yet at the level we assumed as the average for the full year. We continue to assess the overall environment for effectuation rates and the impact on future exchange volumes. We believe we have the tools to manage this impact under a variety of scenarios. We continue to make investments in technology to enable growth and streamline operations.

We are executing on the expense initiatives that we discussed on our Q4 2025 earnings call and are recognizing the benefits. These initiatives include engagement tools which are improving recruitment and retention efforts, process automation to address length of stay, and capacity controls which improve our clinical throughput. Among these things, we are executing on AI-related capabilities in our hospitals, physician practices, and the global business center to drive further efficiencies. Most of which have been useful for supporting extending the productivity metrics of our team. Importantly, we have learned that while all of these tools will not work in a pilot state, setting up a governance that either green lights for rapid scaling up or red lights for shutdown help us remain focused.

We have included third-party EMR integrated solutions which will increase our clinician productivity, decrease administrative burden, and improve patient access through programs such as Ambient Scribe, automated discharge summaries, and autonomous professional fee coding in various pilot programs. Additionally, we have increased back-office AI automation, which is improving productivity and consolidating third-party spend to reduce costs. For example, we have almost doubled or more the productivity of our Conifer analytics team. As we look forward, we are actively identifying and piloting agentic workflows to transform further business processes. So far, our work has enabled us to more than offset the expected and an unexpected headwinds that arose in the quarter. Regarding full year 2026 guidance, as in prior years, at this time, we are not addressing the underlying outperformance in our business units during the first quarter.

We’re pleased with our year-to-date performance, we’re reaffirming our full year guidance, and we’ll address our expectations for the full year in the future. As a reminder, after normalizing for the non-recurring items that were reported in 2025 and the first quarter of 2026, and excluding the headwind from the expiration of the Premium Tax Credit, our 2026 adjusted EBITDA is expected to grow at 10% at the midpoint of our range. Finally, we continue to see significant opportunity to utilize share repurchase at our current valuations. We repurchased 1.35 million shares for $318 million in the first quarter of 2026, and expect to continue to deploy capital for share repurchase over t