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Taking a Look at Tenet

Old wounds are showing some healing signs at Tenet (THC - Get Report).

Most investors expect the hospital chain to report another quarterly loss when it publishes its latest results on Tuesday. But fans could push the company's stock higher if the pain seems manageable and the chances for recovery have started to improve.

Tenet has spent years trying to cure massive legal headaches. Now, the company has endured two criminal trials and, some feel, could soon ink a long-awaited government settlement as a result.

In the meantime, CRT Capital analyst Sheryl Skolnick has a fair value rating on Tenet's stock -- but with a positive bias -- heading into Tuesday morning's first-quarter earnings release.

On the one hand, Skolnick calls it "blindingly obvious" that Tenet will report weak volumes like many of its healthier peers. Indeed, she believes that negative industry trends, coupled with what she calls the Tenet penalty, could have sent patient admissions down 2% from a year ago. She also expects the company to report a loss of 4 cents a share -- or double the consensus estimate -- for the quarter. She continues to brace for negative cash flow, after capital expenditures, as well.

On the other hand, Skolnick suggests that investors have grown somewhat numb to poor results from the company.

"The stock probably won't go down if the results are in line" with investors' low expectations, she said. "The stock is more likely to be stable to up -- especially if investors get the sense that the company is making progress toward a settlement."

Back in February, Tenet's stock hit a multiyear low of $6.89 a share as the latest criminal trial dragged on. However, the stock recently bounced above $9 for the first time in months after a jury deadlocked over whether the defendants had illegally bribed physicians in exchange for patient referrals. The stock has since weakened, though, closing at $7.96 on Monday.

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