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Chemed (CHE) Up 5.7% 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 5.7% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Chemed Q2 Earnings Miss Estimates, Margins Rise
Chemed Corporation reported adjusted earnings per share of $5.47 in the second quarter of 2024, up 34.1% year over year. However, the figure missed the Zacks Consensus Estimate by 1.3%.
The company’s GAAP earnings per share was $4.65, up 32.5% from last year’s reported figure.
Revenues in Detail
Revenues in the reported quarter improved 7.6% year over year to $595.9 million. The metric missed the Zacks Consensus Estimate by 1.2%.
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 second quarter, net revenues totaled $374.6 million, up 16.7% year over year.
The rise in revenues was primarily due to a 14.4% increase in days of care and a rise in the geographically weighted average Medicare reimbursement rate of nearly 2.5%.
VITAS also completed its acquisition of the hospice assets and an assisted living facility of Covenant Health and Community Services, Inc. (Covenant Health) in April 2024 for $85 million in cash.
Roto-Rooter
The segment reported sales of $221.3 million in the second quarter, down 5% year over year.
Total Roto-Rooter branch commercial revenues decreased 8.2% from the last year. This consisted of a 6.4% decline in drain cleaning revenues, a 10.4% fall in plumbing, an 11.1% drop in excavation and an 8.8% decrease in water restoration.
Total Roto-Rooter branch residential revenues registered a decrease of 1.6% over the prior-year period. This aggregate residential revenue decline consisted of drain cleaning decreasing 2.6%, plumbing decreasing 3.3%, excavation declining 1% and water restoration decreasing 4.6%.
Margins in Detail
The gross profit increased 14.8% year over year to $206.1 million in the second quarter of 2024. The gross margin expanded 216 basis points (bps) year over year to 34.6% despite a 4.2% increase in the cost of services provided and goods sold.
The adjusted operating profit rose 22.7% from the year-ago period to $103.9 million. The adjusted operating margin expanded 215 bps to 17.4% despite an increase of 7.7% in adjusted operating expenses.
Liquidity & Capital Structure
Chemed exited the second quarter with cash and cash equivalents of $222.9 million compared with $313.4 million at the end of the first quarter. The company did not have any long-term debt at the quarter end.
The cumulative net cash provided by operating activities at the end of the second quarter of 2024 was $162.1 million compared with $192.8 million in the year-ago comparable period.
During the quarter, the company repurchased 100,000 shares of Chemed stock for $55.8 million, which equates to a cost of $557.68 per share. As of Jun 30, 2024, there was approximately $225.9 million of remaining share repurchase authorization under its plan.
Chemed has a consistent dividend-paying history, with the five-year annualized dividend growth being 5.51%.
2024 Guidance
Chemed provided an updated financial outlook for 2024.
The company anticipates 2024 revenues from VITAS, prior to Medicare Cap, to increase in the range of 16.3%-17.3% from the prior year (previously 9%-9.8%). Meanwhile, Roto-Rooter revenues are expected to decline by 4 (earlier revenue growth of 3.5% to 4%) in 2024 compared with the 2023 reported figure.
For 2024, the Zacks Consensus Estimate for total revenues is pegged at $2.44 billion, which indicates an 8% improvement.
For the full-year 2024, the adjusted earnings per share is estimated in the range of $23.55-$23.80 (earlier $23.30-$23.70). The Zacks Consensus Estimate for the metric is pegged at $23.20, which implies 14.3% 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.
VGM Scores
Currently, Chemed has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 indicates a downward shift. Notably, Chemed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Chemed belongs to the Zacks Medical - Outpatient and Home Healthcare industry. Another stock from the same industry, Quest Diagnostics (DGX - Free Report) , has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Quest Diagnostics reported revenues of $2.4 billion in the last reported quarter, representing a year-over-year change of +2.5%. EPS of $2.35 for the same period compares with $2.30 a year ago.
Quest Diagnostics is expected to post earnings of $2.28 per share for the current quarter, representing a year-over-year change of +2.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Quest Diagnostics. Also, the stock has a VGM Score of B.
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Chemed (CHE) Up 5.7% 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 5.7% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Chemed Q2 Earnings Miss Estimates, Margins Rise
Chemed Corporation reported adjusted earnings per share of $5.47 in the second quarter of 2024, up 34.1% year over year. However, the figure missed the Zacks Consensus Estimate by 1.3%.
The company’s GAAP earnings per share was $4.65, up 32.5% from last year’s reported figure.
Revenues in Detail
Revenues in the reported quarter improved 7.6% year over year to $595.9 million. The metric missed the Zacks Consensus Estimate by 1.2%.
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 second quarter, net revenues totaled $374.6 million, up 16.7% year over year.
The rise in revenues was primarily due to a 14.4% increase in days of care and a rise in the geographically weighted average Medicare reimbursement rate of nearly 2.5%.
VITAS also completed its acquisition of the hospice assets and an assisted living facility of Covenant Health and Community Services, Inc. (Covenant Health) in April 2024 for $85 million in cash.
Roto-Rooter
The segment reported sales of $221.3 million in the second quarter, down 5% year over year.
Total Roto-Rooter branch commercial revenues decreased 8.2% from the last year. This consisted of a 6.4% decline in drain cleaning revenues, a 10.4% fall in plumbing, an 11.1% drop in excavation and an 8.8% decrease in water restoration.
Total Roto-Rooter branch residential revenues registered a decrease of 1.6% over the prior-year period. This aggregate residential revenue decline consisted of drain cleaning decreasing 2.6%, plumbing decreasing 3.3%, excavation declining 1% and water restoration decreasing 4.6%.
Margins in Detail
The gross profit increased 14.8% year over year to $206.1 million in the second quarter of 2024. The gross margin expanded 216 basis points (bps) year over year to 34.6% despite a 4.2% increase in the cost of services provided and goods sold.
The adjusted operating profit rose 22.7% from the year-ago period to $103.9 million. The adjusted operating margin expanded 215 bps to 17.4% despite an increase of 7.7% in adjusted operating expenses.
Liquidity & Capital Structure
Chemed exited the second quarter with cash and cash equivalents of $222.9 million compared with $313.4 million at the end of the first quarter. The company did not have any long-term debt at the quarter end.
The cumulative net cash provided by operating activities at the end of the second quarter of 2024 was $162.1 million compared with $192.8 million in the year-ago comparable period.
During the quarter, the company repurchased 100,000 shares of Chemed stock for $55.8 million, which equates to a cost of $557.68 per share. As of Jun 30, 2024, there was approximately $225.9 million of remaining share repurchase authorization under its plan.
Chemed has a consistent dividend-paying history, with the five-year annualized dividend growth being 5.51%.
2024 Guidance
Chemed provided an updated financial outlook for 2024.
The company anticipates 2024 revenues from VITAS, prior to Medicare Cap, to increase in the range of 16.3%-17.3% from the prior year (previously 9%-9.8%). Meanwhile, Roto-Rooter revenues are expected to decline by 4 (earlier revenue growth of 3.5% to 4%) in 2024 compared with the 2023 reported figure.
For 2024, the Zacks Consensus Estimate for total revenues is pegged at $2.44 billion, which indicates an 8% improvement.
For the full-year 2024, the adjusted earnings per share is estimated in the range of $23.55-$23.80 (earlier $23.30-$23.70). The Zacks Consensus Estimate for the metric is pegged at $23.20, which implies 14.3% 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.
VGM Scores
Currently, Chemed has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 indicates a downward shift. Notably, Chemed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Chemed belongs to the Zacks Medical - Outpatient and Home Healthcare industry. Another stock from the same industry, Quest Diagnostics (DGX - Free Report) , has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Quest Diagnostics reported revenues of $2.4 billion in the last reported quarter, representing a year-over-year change of +2.5%. EPS of $2.35 for the same period compares with $2.30 a year ago.
Quest Diagnostics is expected to post earnings of $2.28 per share for the current quarter, representing a year-over-year change of +2.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Quest Diagnostics. Also, the stock has a VGM Score of B.