Tenet

(THC) - Get Report

continues to bleed.

The ailing hospital chain, hit by a big settlement payment to the federal government, reported a much wider second-quarter loss than it did a year ago. Tenet lost $398 million, or 85 cents in share, in the latest period. That compares with a loss of $33 million, or 7 cents a share, in the same quarter last year.

Excluding the settlement payment, however, results from continuing operations actually came in better than expected. Without that 98-cent charge, the company would have reported an operating profit of 3 cents a share -- instead of the 3-cent loss Wall Street had been forecasting.

"Strong pricing and cost control more than offset continued weakness in admissions and increases in bad debt during the second quarter, which enabled us to exceed our expectations for the quarter," Tenet CEO Trevor Fetter said. Looking ahead, "we believe the company is now well positioned to grow."

The company's isn't exactly growing in the meantime. Revenue did rise 2.5% to $2.12 billion in the latest quarter but still fell short of the $2.2 billion consensus estimate. Meanwhile, other important metrics continued to deteriorate.

Notably, total admissions fell 2.7%, and outpatient volumes -- which can be especially profitable -- dropped 6% in the latest quarter. At the same time, uninsured admissions -- which often generate no money at all -- rose 2.3%.

Tenet's stock fell 2.2% to $5.70 in after-hours trading following that update.

By now, of course, most people have grown accustomed to weak vital signs at the company. So they expected admissions to fall -- and losses to continue -- in the latest period.

Still, CRT Capital analyst Sheryl Skolnick believes that Tenet might fare better than it did a quarter ago and even beat Wall Street expectations. She assumed the company would suffer another drop in same-hospital admissions, though not as steep as the 3.3% decline reported for the first quarter, and post a loss from continuing operations of a penny a share.

Skolnick warned, however, that investors could face trouble figuring out whether Tenet hit expectations or not. Notably, she said, Tenet has laid out plans to sell a number of underperforming assets that will now be included in discontinued operations -- which could make same-store, year-over-year comparisons difficult for some time.

"It's going to be tough to understand whether Tenet meets the consensus estimates," Skolnick said just ahead of the company's report. "We don't have a good baseline for comparisons. So we don't know what the real growth rate is going to be -- plus, minus or otherwise."

Skolnick has a fair value rating on the company's shares.

Ryan Beck analyst Robert Mains worries that Tenet itself could be overestimating its ability to dramatically improve upon those results going forward.

He remains cautious on the stock.

"Given the weak volume trends in the quarter (four of the other six publicly traded hospital management companies had same-store admission growth of 0.5% or less), we believe Tenet's earnings could fall short of our expectations," Mains wrote on Tuesday. "Our rating is market-perform, due to the difficulty we expect in the company's efforts to effect a turnaround in a very challenging secular environment."

Mains has an $8.30 price target on Tenet's stock. His firm makes a market in the shares.

UBS analyst Raymond Garson seems to like Tenet's bonds even less.

Garson recently recommended selling Tenet's bonds, citing the company's huge debt load, poor operating performance and weak cash flow as concerns. To be fair, Garson believes that Tenet has enough liquidity to avert disaster, but that the company faces serious challenges ahead, and that bondholders should be better rewarded for their support.

UBS has provided investment banking services to Tenet in the past and continues to make a market in the company's securities.

Meanwhile, BMO stock analyst Erik Chiprich sees a tough road ahead for Tenet as well. On a bright note, Chiprich was encouraged by the detailed turnaround plan presented by company management at last month's investor day. Still, he left that meeting with some doubts firmly in place.

"While the blueprint to improved operations is appreciated -- and the setting of goals provides a measuring stick -- we believe reaching THC's goal is no simple task and that progress could be slower than the company expects," Chiprich wrote last month. So "we don't buy into the story at this point, as the turnaround may be easier said than done."

Chiprich has a market perform rating and an $8 price target on Tenet's stock. His firm has no business ties to the company.

Prudential analyst David Shove left that same meeting feeling decidedly more reassured. Unlike many, Shove believes that Tenet can in fact hit its aggressive volume growth targets and turn the company around.

"Overall, we were impressed by management's deep understanding of the issues faced by the company and the high level of energy brought to bear on these problems," Shove wrote after the meeting. Thus, "we reiterate our overweight rating on the stock."

Still, when it comes to Tenet, Shove has fared better by exercising caution instead. He recommended selling the stock through a downturn a few years ago. But he upgraded the stock to neutral in mid-2004 -- and finally to overweight this spring -- as the shares went on to set a series of new multiyear lows.