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Chemed (CHE) Up 2.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Chemed (CHE - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Chemed due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Chemed reported adjusted earnings per share of $6.60 in the fourth quarter of 2023, up 35% year over year. The figure also surpassed the Zacks Consensus Estimate by 5.6%.
The company’s GAAP earnings per share was $5.90, up 42.9% from last year’s reported figure. For the full year, the adjusted EPS was $20.30, reflecting an 8.1% increase from the year-ago period.
Revenues in Detail
Revenues in the reported quarter improved 7.2% year over year to $585.9 million. The metric missed the Zacks Consensus Estimate by 0.3%. Full-year revenues were $2.26 billion, up 6.1% from last year’s revenues.
Segmental Details
Chemed operates through two wholly owned subsidiaries — VITAS (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing plus drain cleaning service provider).
VITAS
In the fourth quarter, net revenues totaled $350 million, up 13.6% year over year.
The rise in revenues was primarily due to an 11% increase in days of care and a rise in the geographically weighted average Medicare reimbursement rate of nearly 2.3%.
Roto-Rooter
The segment reported sales of $235.9 million in the fourth quarter, down 1.1% year over year.
Total Roto-Rooter branch commercial revenues decreased 7.9% from the last year. This consisted of an 8.6% decline in drain cleaning revenues, a 6.3% fall in plumbing, a 5.9% decline in excavation and a 16.1% decrease in water restoration.
Total Roto-Rooter branch residential revenues registered an increase of 2% over the prior-year period. This consisted of a 1.4% increase in plumbing, excavation expanding by 4% and water restoration increasing by 8.6%, offset by a 5.6% decrease in drain cleaning.
Margins in Detail
The gross profit increased 15.5% year over year to $227.6 million in the fourth quarter of 2023. The gross margin expanded 279 basis points (bps) year over year to 38.8% despite a 2.5% increase in the cost of products and services.
The adjusted operating profit increased 26.9% from the year-ago period to $127.1 million. The adjusted operating margin expanded 338 bps to 21.7% despite an increase of 3.6% in adjusted operating expenses.
Liquidity & Capital Structure
Chemed exited the fourth quarter of 2023 with cash and cash equivalents of $264 million, which marked a significant increase from $74.2 million at the end of the fourth quarter of 2022. Meanwhile, the company did not have any long-term debt at the quarter end compared with $92.5 million at the end of the fourth quarter of 2022.
The cumulative net cash provided by operating activities at the end of the fourth quarter of 2023 was $330.3 million compared with $309.9 million in the year-ago period.
During the quarter, the company repurchased 79,512 shares of Chemed stock for $46 million, which equates to a cost per share of $579.09. As of Dec 30, 2023, there was approximately $314.1 million of remaining share repurchase authorization under its plan.
Chemed has a consistent dividend-paying history, with the five-year annualized dividend growth being 6.05%.
2024 Guidance
Chemed initiated its financial outlook for 2024.
The company anticipates 2024 revenues from VITAS, prior to Medicare Cap, to increase in the range of 9%-9.8% from the prior year.
Roto-Rooter is expected to achieve 2024 revenue growth in the range of 3.5.
For 2024, the Zacks Consensus Estimate for total revenues is pegged at $2.37 billion, suggesting 4.6% growth from the 2023 reported figure.
For the full-year 2024, the adjusted EPS is estimated in the range of $23.30-$23.70. The Zacks Consensus Estimate for the metric is pegged at $22.93, suggesting 12.9% growth over the 2023 adjusted figure.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted -7.04% due to these changes.
VGM Scores
At this time, Chemed has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Chemed has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Chemed is part of the Zacks Medical - Outpatient and Home Healthcare industry. Over the past month, DaVita HealthCare (DVA - Free Report) , a stock from the same industry, has gained 7.8%. The company reported its results for the quarter ended December 2023 more than a month ago.
DaVita HealthCare reported revenues of $3.15 billion in the last reported quarter, representing a year-over-year change of +7.9%. EPS of $1.87 for the same period compares with $1.11 a year ago.
DaVita HealthCare is expected to post earnings of $1.96 per share for the current quarter, representing a year-over-year change of +24.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +4.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for DaVita HealthCare. Also, the stock has a VGM Score of B.
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Chemed (CHE) Up 2.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Chemed (CHE - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Chemed due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Chemed Q4 Earnings Surpass Estimates, Margins Expand
Chemed reported adjusted earnings per share of $6.60 in the fourth quarter of 2023, up 35% year over year. The figure also surpassed the Zacks Consensus Estimate by 5.6%.
The company’s GAAP earnings per share was $5.90, up 42.9% from last year’s reported figure. For the full year, the adjusted EPS was $20.30, reflecting an 8.1% increase from the year-ago period.
Revenues in Detail
Revenues in the reported quarter improved 7.2% year over year to $585.9 million. The metric missed the Zacks Consensus Estimate by 0.3%. Full-year revenues were $2.26 billion, up 6.1% from last year’s revenues.
Segmental Details
Chemed operates through two wholly owned subsidiaries — VITAS (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing plus drain cleaning service provider).
VITAS
In the fourth quarter, net revenues totaled $350 million, up 13.6% year over year.
The rise in revenues was primarily due to an 11% increase in days of care and a rise in the geographically weighted average Medicare reimbursement rate of nearly 2.3%.
Roto-Rooter
The segment reported sales of $235.9 million in the fourth quarter, down 1.1% year over year.
Total Roto-Rooter branch commercial revenues decreased 7.9% from the last year. This consisted of an 8.6% decline in drain cleaning revenues, a 6.3% fall in plumbing, a 5.9% decline in excavation and a 16.1% decrease in water restoration.
Total Roto-Rooter branch residential revenues registered an increase of 2% over the prior-year period. This consisted of a 1.4% increase in plumbing, excavation expanding by 4% and water restoration increasing by 8.6%, offset by a 5.6% decrease in drain cleaning.
Margins in Detail
The gross profit increased 15.5% year over year to $227.6 million in the fourth quarter of 2023. The gross margin expanded 279 basis points (bps) year over year to 38.8% despite a 2.5% increase in the cost of products and services.
The adjusted operating profit increased 26.9% from the year-ago period to $127.1 million. The adjusted operating margin expanded 338 bps to 21.7% despite an increase of 3.6% in adjusted operating expenses.
Liquidity & Capital Structure
Chemed exited the fourth quarter of 2023 with cash and cash equivalents of $264 million, which marked a significant increase from $74.2 million at the end of the fourth quarter of 2022. Meanwhile, the company did not have any long-term debt at the quarter end compared with $92.5 million at the end of the fourth quarter of 2022.
The cumulative net cash provided by operating activities at the end of the fourth quarter of 2023 was $330.3 million compared with $309.9 million in the year-ago period.
During the quarter, the company repurchased 79,512 shares of Chemed stock for $46 million, which equates to a cost per share of $579.09. As of Dec 30, 2023, there was approximately $314.1 million of remaining share repurchase authorization under its plan.
Chemed has a consistent dividend-paying history, with the five-year annualized dividend growth being 6.05%.
2024 Guidance
Chemed initiated its financial outlook for 2024.
The company anticipates 2024 revenues from VITAS, prior to Medicare Cap, to increase in the range of 9%-9.8% from the prior year.
Roto-Rooter is expected to achieve 2024 revenue growth in the range of 3.5.
For 2024, the Zacks Consensus Estimate for total revenues is pegged at $2.37 billion, suggesting 4.6% growth from the 2023 reported figure.
For the full-year 2024, the adjusted EPS is estimated in the range of $23.30-$23.70. The Zacks Consensus Estimate for the metric is pegged at $22.93, suggesting 12.9% growth over the 2023 adjusted figure.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted -7.04% due to these changes.
VGM Scores
At this time, Chemed has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Chemed has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Chemed is part of the Zacks Medical - Outpatient and Home Healthcare industry. Over the past month, DaVita HealthCare (DVA - Free Report) , a stock from the same industry, has gained 7.8%. The company reported its results for the quarter ended December 2023 more than a month ago.
DaVita HealthCare reported revenues of $3.15 billion in the last reported quarter, representing a year-over-year change of +7.9%. EPS of $1.87 for the same period compares with $1.11 a year ago.
DaVita HealthCare is expected to post earnings of $1.96 per share for the current quarter, representing a year-over-year change of +24.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +4.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for DaVita HealthCare. Also, the stock has a VGM Score of B.