Tenet’s shares drop 11% as loss exceeds forecasts

Shares of Tenet Healthcare Corp., the second-largest U.S. hospital chain, fell 11%, the most in more than two years, as third-quarter losses from continuing operations exceeded analysts’ estimates.

The deficit on the continuing business totaled 5 to 7 cents a share, Dallas-based Tenet said Monday in a preliminary statement of the quarter’s results. Bad-debt expenses and uninsured admissions rose more than Tenet said it had expected.

The company sold hospitals in Florida, California and Louisiana, partly to raise cash to help pay a $900-million settlement of claims that Tenet had overcharged the U.S. government. Tenet has accumulated more than $2 billion in losses since 1969, and the latest results raised concern that profit may not emerge quickly in the wake of the settlement.

“This quarter should temper expectations appropriately,� said Sheryl Skolnick, an analyst at CRT Capital Group Inc. in Stamford, Conn.

Shares of Tenet fell 88 cents to $7.42 on Monday. The percentage drop was the biggest since March 2004. The stock has declined 3.1% this year.

Analysts had expected Tenet to report a loss of 1 cent a share, according to the average estimate of 19 analysts in a Thomson Financial survey. Thomson doesn’t disclose the basis for its estimates.

The company’s third-quarter net loss narrowed from a year earlier, when Hurricane Katrina damaged six hospitals and the number of uninsured patients surged.

The net loss was $82 million to $92 million, or 17 to 20 cents. Final results will be issued Nov. 7. In the third quarter a year earlier, Tenet reported a net loss of $408 million, or 87 cents, including Katrina-related pretax costs of $241 million.

Analysts have said Tenet’s ability to post future profit depends on whether the company can increase hospital admissions to support cost cutting in unprofitable areas, hospital divestitures, and marketing efforts to rebuild trust with doctors. Profit-building will continue to be tempered by “difficult macro trends� affecting the hospital sector, said Kenneth Weakley, a New York analyst with Zurich-based UBS Securities.