Tenet Healthcare surges on 40% EPS beat, $1.9B CommonSpirit deal
Hospital operator beats Q4 estimates and regains full ownership of Conifer Health Solutions in transformative transaction
Tenet Healthcare Corporation shares jumped on Wednesday after the hospital operator reported fourth-quarter earnings that surpassed analyst expectations by 40.4% and announced a $1.9 billion contract termination with CommonSpirit Health that unlocks full ownership of its revenue cycle management subsidiary.
The Dallas-based healthcare company reported adjusted earnings per share of $4.70 for the fourth quarter of 2025, significantly exceeding the consensus estimate of $3.35, while revenue reached $5.527 billion against projections of $5.248 billion. The strong performance capped a fiscal year that saw free cash flow surge 127% year-over-year to $2.53 billion.
"We delivered strong revenue growth, disciplined operations, and improved margins across our business segments," said Tenet's chief executive officer in the earnings announcement. The company completed $1.386 billion in share buybacks during 2025 as part of its capital return strategy, while improving its net debt to adjusted EBITDA ratio to 2.25x, demonstrating solid progress on deleveraging.
The standout strategic development involves the termination of Tenet's revenue cycle management contract with CommonSpirit Health, one of the nation's largest health systems. Under the agreement announced February 2, CommonSpirit will pay approximately $1.9 billion to Tenet over three years, with the first installment of $540 million received in the first quarter of 2026. The remaining payments of $453 million each will come in the first quarters of 2027, 2028, and 2029.
As part of the transaction, Tenet regained full ownership of Conifer Health Solutions by redeeming CommonSpirit's 23.8% equity stake for approximately $540 million. The deal effectively offsets the initial payment from CommonSpirit, making the net cash impact immediately favorable. More importantly, it eliminates redeemable non-controlling interest and other liabilities of approximately $885 million from Tenet's balance sheet while increasing additional paid-in capital by about $305 million.
Management characterized the transaction as an "accretive asset sale" that unlocks "hidden value" in Conifer and provides Tenet with full strategic control to invest in initiatives including artificial intelligence, automation, and offshore expansion. The equity transfer was retroactively effective January 1, 2026, meaning Tenet will recognize all Conifer economics for the full year 2026 and will eliminate approximately $100 million in non-controlling interest expenses.
Conifer will continue providing revenue cycle management services to CommonSpirit through the end of 2026, after which their service agreement concludes. The transition marks the end of a long-standing partnership that had previously structured Conifer as a joint venture.
Looking ahead to fiscal year 2026, Tenet provided guidance that reflects confidence in its operating momentum. The company projects adjusted earnings per share of $16.19 to $18.47 and free cash flow of $2.94 billion to $3.29 billion, suggesting continued strong cash generation and operational efficiency gains.
Analysts have responded positively to both the earnings beat and the Conifer transaction. TD Cowen maintained its "Buy" rating with a price target of $230, while Cantor Fitzgerald kept its "Overweight" rating and a more bullish $245 target. The consensus analyst price target stands at $237, representing roughly 23% upside from current levels.
The credit rating agency Fitch upgraded Tenet Healthcare's outlook to positive from stable, citing the company's improved operating performance and the strategic benefits of the Conifer transaction. Tenet's leverage metrics have improved markedly, positioning the company for continued investment in growth initiatives while maintaining financial flexibility.
Shares of Tenet were trading at $193.04 in recent market action, giving the company a market capitalization of approximately $17 billion. The stock has gained more than 50% over the past 52 weeks, reflecting investor confidence in the company's turnaround and strategic positioning within the healthcare services sector.
The CommonSpirit deal marks a pivotal moment in Tenet's evolution, allowing the company to consolidate control of its revenue cycle management capabilities while generating significant cash proceeds. Management has indicated that the strengthened balance sheet will enable accelerated capital deployment, including potential additional share repurchases, ambulatory mergers and acquisitions, and organic growth investments.
With the Conifer transaction complete and a strong 2025 earnings season behind it, Tenet Healthcare enters 2026 with full ownership of its revenue cycle operations, improving cash flow metrics, and analyst support that suggests continued confidence in the hospital operator's strategic direction.