Shares of hospital operator Tenet Healthcare (NYSE:THC)
fell 5% in the afternoon session after the company reported third-quarter results that showed declining profitability despite beating headline expectations. While the hospital operator's earnings per share and revenue for the period surpassed Wall Street estimates and it raised its financial outlook for the full year, investors appeared to focus on weaker underlying metrics. The company's operating margin fell to 16.8% in the quarter, a significant drop from 21.3% during the same period in the previous year. This contraction in profitability seemed to overshadow the positive headline numbers, prompting the negative market reaction.
Tenet Healthcare (THC) reported mixed Q3 2025 results, with a slight revenue miss but a strong beat on earnings per share. The company also raised its full-year profit outlook.
Hospital operator Tenet Healthcare (NYSE:THC) announced better-than-expected revenue in Q3 CY2025, with sales up 3.3% year on year to $5.29 billion. The company expects the full year’s revenue to be around $21.25 billion, close to analysts’ estimates. Its non-GAAP profit of $3.70 per share was 10.5% above analysts’ consensus estimates.
Wall Street’s bearish price targets for the stocks in this article signal serious concerns.
Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
Mid-cap stocks often strike the right balance between having proven business models and market opportunities that can support $100 billion corporations.
However, they face intense competition from scaled industry giants and can be disrupted by new innovative players vying for a slice of the pie.
The best-performing stocks typically have robust sales growth, increasing margins, and rising returns on capital,
and those that can maintain this trifecta year in and year out often become the legends of the investing world.
Even if a company is profitable, it doesn’t always mean it’s a great investment.
Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, limiting growth.
This has capped the upside for healthcare stocks lately as the industry’s flat return over the past six months has trailed the S&P 500’s 10.5% gain.
Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune by purchasing wonderful businesses at reasonable prices.
But these hidden gems are few and far between - many stocks that appear cheap often stay that way because they face structural issues.
While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns.
Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Tenet Healthcare currently trades at $161.00 and has been a dream stock for shareholders. It’s returned 510% since August 2020, blowing past the S&P 500’s 92.2% gain. The company has also beaten the index over the past six months as its stock price is up 11.3% thanks to its solid quarterly results.
Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential.
However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
