Wall Street believes Tenet Healthcare ( THC) CFO Robert Shapard had a good reason to leave. But investors in the struggling hospital chain took little comfort Friday.

Shapard, who arrived at Tenet just seven months ago with virtually no experience in the hospital industry, said late Thursday he would leave to return to TXU ( TXU) for what could prove to be a key advisory role. Though the timing of his move initially raised eyebrows in some quarters, Shapard said he "could not pass up" the chance to explore strategic options for a regulated power division. TXU says it wants to further maximize shareholder value following a 75% run-up in the company's stock price over the past year.

Analysts mostly bought that explanation Friday. Even so, Tenet's stock tumbled 5.6% to set a fresh 19-month low of $9.23.

"Given Shapard's experience in the utility industry, it is not surprising that he was offered an opportunity to return to the utility industry and that the offer was compelling enough for him to decide to leave a position in the hospital industry -- an industry which was new to him," writes Lehman Brothers analyst Adam Feinstein, who has an underweight rating on Tenet's stock. But "we do not believe that Shapard's decision to leave at this time is a signal of a new issue at Tenet."

Rule Book

Several other analysts reached the same conclusion on Friday, though Fulcrum analyst Sheryl Skolnick sounded a bit more worried than most.

To be fair, Skolnick raised some questions about whether Shapard was the right person for the job in the first place. Moreover, she said that she had sensed that Shapard himself was not "fully engaged" in the post. Thus, she suggested, he could very well be replaced by a more appropriate pick going forward.

That said, however, Skolnick still felt troubled by the development.

"There are a couple of rules that usually come into play here," explained Skolnick, who has a neutral rating on Tenet's stock. "One: Happy people don't leave. Two: When happy people leave, see rule one. Three: Nothing good ever happens after a CFO leaves."

Actually, many experts are looking for a fresh wave of bad news even before Shapard formally departs next month. The CFO has agreed to stick around long enough to certify third-quarter results that -- given the havoc wreaked by recent hurricanes -- could prove especially ugly.

Feinstein believes that Tenet will report its worst quarterly loss of the year and fall short of Wall Street's low expectations in the process. He notes that Tenet weathered "significant disruption" as a result of Hurricane Katrina, with four of the company's Gulf Coast hospitals still closed and facing an uncertain future. And he expects the company's negative volume trends to continue for some time.

Lonely Bull

Citigroup analyst Oksanna Butler stands out as an optimist in the crowd. Even after news of Shapard's departure -- which she called an "unwelcome surprise" -- Butler maintained her buy recommendation and $16 target price on the stock Friday.

Still, even Butler acknowledges that Tenet must clear some high hurdles in order to get there. Specifically, she says that Tenet must accomplish three things -- grow volumes, raise managed care prices and lower expenses after resolving its government probes -- in order to turn the company around and ultimately return to profitability. For now, she still has faith while admitting that some others may not.

"We have said over the last couple of months that we expect a bumpy road ahead for the stock, but that we believe patient investors will be rewarded," Butler wrote. "We maintain this view, although we suspect many investors' patience is wearing thin."

Yet, Skolnick suggests that Tenet bulls have already assumed too much. She believes they are banking on a faster and stronger recovery than they should. And she sees looming pressure on the stock in the meantime.

She mentions the possibility of two negative catalysts in particular. Like many, she expects the company to report a dismal third quarter and offer bleak guidance as well. Meanwhile, as previously reported by TheStreet.com, she notes that one of Tenet's largest shareholders faces a change in control that could lead to selling pressure on the stock.

Thus, she believes the stock could set fresh lows although she hesitates to recommend selling it just yet. She previously avoided downgrading the stock last month because she could not bring herself to do so after all of the devastation caused by Hurricane Katrina.

"Perhaps that attack of morality denied us the opportunity to improve our recommendation performance, and that of investors who rely on our work," Skolnick admitted. "But it was still the right thing to do, in our view. ... (Meanwhile), we stick with the neutral rating, but strongly remind investors that the fundamentals do not support the current valuation -- and haven't for a very long time."

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