Hospitals under pressure? This surgery-center chain is up 40.8% since April RSS CTA

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Hospital operators are squeezed from two sides. Groups such as HCA Healthcare (NYSE:HCA) contend with uneven patient admissions and rising nursing wage inflation, while more routine surgery is leaving the hospital for cheaper, higher-margin outpatient centers.

Tenet Healthcare (NYSE:THC), which runs the largest U.S. network of those centers, sits on the right side of this shift. The stock is up 40.8% since ProPicks AI added it in April, and on October 29 its third-quarter adjusted earnings per share beat consensus by 42%, with management raising guidance.

This split, between a strained hospital model and a growing outpatient business, shows where opportunity is forming in healthcare. With the November rebalance now live, ProPicks AI’s Healthcare Heroes strategy holds Tenet alongside a precision laboratory equipment supplier up 23.2%, a clinical research partner up 15.6% and a specialty pharma turnaround up 24.3%, all since entry.

Shifting Surgery to Higher-Margin Settings

Tenet runs 49 acute care hospitals and more than 500 surgery centers across 37 states, and its USPI unit is the largest ambulatory surgery network in the country. USPI is positioned to benefit as procedures such as joint replacements move from hospital outpatient departments to lower-cost settings.

In the third quarter, USPI brought in about a quarter of Tenet’s revenue but roughly 40% of its adjusted EBITDA. It also posted its strongest quarter of 2026, with adjusted EBITDA up 9.1% to $537 million at a 39.2% margin and same-store total joint replacement growth of 12.8%.

Group results followed, with adjusted earnings per share of $6.64 topping the $4.67 consensus on revenue of $5.63 billion, up 6.5% from a year earlier. Hospital adjusted admissions rose 3.2%, and core adjusted EBITDA grew 10% year over year excluding $147 million of one-time items from the transition of its Conifer revenue-cycle contract. Management raised full-year adjusted EBITDA guidance to between $5.05 billion and $5.20 billion.

Margins have widened over a longer stretch as well. From 2022 to the last twelve months, revenue grew 15.5% while operating income rose 70.4%, and the operating margin went from 13.0% to 19.1%.

Cash Flow and a Lighter Debt Load

On consensus analyst projections compiled on InvestingPro, Tenet trades at 12.3x forward earnings. InvestingPro data also show an EV/EBITDA of 6.5x, a free cash flow yield of 15.3% and a return on investment of 15.0%.

The company also lifted its 2026 adjusted free cash flow guidance to between $2.825 billion and $3.125 billion, and has repurchased $1.615 billion of its own stock this year.

Total debt has fallen from $16.3 billion in 2022 to $13.2 billion now while EBITDA rose from $3.3 billion to $5.1 billion. Management puts leverage at 2.11x EBITDA, with $2.67 billion in cash.

Wall Street is constructive: 19 of 23 analysts rate the shares a buy, and the consensus price target of $298.82 sits about 9% above the current price, within a range of $265 to $342.

One risk is a tougher 2027. A $450 million Conifer EBITDA contribution in 2026 will not repeat, and ACA exchange admissions fell 18% year over year in the third quarter. Management still guides to EBITDA growth for 2027 after adjusting for the Conifer item.

The Tenet Healthcare Pro Research Report goes deeper on surgery-center unit economics, free cash flow generation and the deleveraging path.

Finding Cash-Generating Turnarounds in Healthcare

Tenet’s 40.8% gain since entry has come alongside a business improving on several fronts: a mix moving toward higher-margin surgery, cash flow that funds buybacks and a balance sheet that has lightened since 2022. ProPicks AI had held the stock for months before the third-quarter beat.

ProPicks AI rescreens its data-driven strategies every month, and after the November update, Healthcare Heroes also includes life-science tools, research services and a specialty drugmaker in recovery, all with double-digit gains since entry. Full access to every ProPicks AI strategy, including the refreshed November picks, costs $9 a month.

The author holds no position in the stocks mentioned. Data and financial metrics as of November 3, 2026.