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Chemed (CHE) Beats on Q3 Earnings, Raises 2018 Guidance
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Chemed Corporation (CHE - Free Report) delivered third-quarter 2018 adjusted earnings per share (EPS) of $3.07, up 42.8% from the year-ago period. The bottom line sailed past the Zacks Consensus Estimate of $2.79.
Quarter in Detail
Revenues in the reported quarter increased 6.4% year over year to $444.2 million, beating the Zacks Consensus Estimate of $442 million.
Chemed operates through two wholly-owned subsidiaries, namely VITAS (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing plus drain cleaning service provider).
In the third quarter, net revenues at VITAS totaled $302 million, reflecting an increase of 6.5% year over year. The top line was driven by 0.8% growth in geographically weighted average Medicare reimbursement rate and a 7.8% rise in average daily census. A Medicare Cap liability affected this revenue improvement by 0.6%. The revenue strength was partially offset by acuity mix shift, which negatively impacted revenues by 1.8%.
Roto-Rooter reported sales of $142 million in the third quarter, up 12.1% year over year. According to the company, revenues from water restoration climbed 18.3% year over year to $25 million.
Gross margin expanded 26 basis points (bps) year over year to 31.3%. Adjusted operating margin grew 117 bps to 16.1% in the quarter under review on the back of a 14.7% climb in operating profit.
Chemed exited the third quarter of 2018 with total cash and cash equivalents of $67.5 million, a significant rise from $12.7 million at the end of the second quarter of 2018. The company had total debt of $130 million at the end of the third quarter, reflecting a sharp rise from $103.4 million at the end of the second quarter. As of Sep 30, 2018, the company had approximately $284 million of undrawn borrowing capacity under its existing five-year credit agreement.
During the third quarter, the company repurchased shares worth $37.7 million. The board has authorized an additional $150 million for stock buyback under Chemed’s existing plan. As of Sep 30, 2018, the company had $84 million of remaining share repurchase authorization under this plan.
2018 Outlook Raised
The company now projects VITAS Healthcare revenue growth for 2018 in the range of 4.5- 5%, tightened from the previously provided band of 4-5%, prior to the Medicare Cap. Also, admissions are anticipated to improve 3.5-5% and Average Daily Census in 2018 is predicted to ascend 6.7%. Medicare Cap billing limitations are expected at around $1.3 million in the fourth quarter of 2018.
The Roto-Rooter business is now likely to augment 13-14% compared with the earlier-provided range of 12-13% for the full year. The view was backed by a 2% increase in job pricing, consistent growth in core plumbing plus drain cleaning services as well as revenue generation from water restoration services.
Full-year adjusted EPS is now envisioned to grow in the band of $11.80-$11.90 compared with the past forecast of $10.60-$10.85. The Zacks Consensus Estimate of $11.48 falls below the expected range.
Our Take
Chemed exited the third quarter on a solid note. Also, the company witnessed year-over-year growth in earnings and revenues. We are encouraged to note that the company’s subsidiaries saw a year-over-year revenue rise in the quarter under consideration. The expansion in adjusted operating margin buoys optimism. Further, the projection for 2018 hints at a brighter picture ahead.
However, reimbursement-related issues, seasonality in business, a competitive landscape and dependence on government mandates constantly pose challenges to the stock.
Zacks Rank & Key Picks
Chemed carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Humana Inc. (HUM - Free Report) and Inogen, Inc. (INGN - Free Report) .
Henry Schein is expected to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for adjusted EPS is $1.01 and for revenues, $3.35 billion. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Humana is likely to release third-quarter 2018 results on Nov 7. The Zacks Consensus Estimate for the quarterly EPS is pegged at $4.29 and for revenues, stands at $13.97 billion. The stock holds a Zacks Rank of 2.
Inogen is slated to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for EPS is pegged at 52 cents and for revenues, at $91.08 million. The stock sports a Zacks Rank #1 (Strong Buy).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Chemed (CHE) Beats on Q3 Earnings, Raises 2018 Guidance
Chemed Corporation (CHE - Free Report) delivered third-quarter 2018 adjusted earnings per share (EPS) of $3.07, up 42.8% from the year-ago period. The bottom line sailed past the Zacks Consensus Estimate of $2.79.
Quarter in Detail
Revenues in the reported quarter increased 6.4% year over year to $444.2 million, beating the Zacks Consensus Estimate of $442 million.
Chemed operates through two wholly-owned subsidiaries, namely VITAS (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing plus drain cleaning service provider).
In the third quarter, net revenues at VITAS totaled $302 million, reflecting an increase of 6.5% year over year. The top line was driven by 0.8% growth in geographically weighted average Medicare reimbursement rate and a 7.8% rise in average daily census. A Medicare Cap liability affected this revenue improvement by 0.6%. The revenue strength was partially offset by acuity mix shift, which negatively impacted revenues by 1.8%.
Roto-Rooter reported sales of $142 million in the third quarter, up 12.1% year over year. According to the company, revenues from water restoration climbed 18.3% year over year to $25 million.
Gross margin expanded 26 basis points (bps) year over year to 31.3%. Adjusted operating margin grew 117 bps to 16.1% in the quarter under review on the back of a 14.7% climb in operating profit.
Chemed exited the third quarter of 2018 with total cash and cash equivalents of $67.5 million, a significant rise from $12.7 million at the end of the second quarter of 2018. The company had total debt of $130 million at the end of the third quarter, reflecting a sharp rise from $103.4 million at the end of the second quarter. As of Sep 30, 2018, the company had approximately $284 million of undrawn borrowing capacity under its existing five-year credit agreement.
During the third quarter, the company repurchased shares worth $37.7 million. The board has authorized an additional $150 million for stock buyback under Chemed’s existing plan. As of Sep 30, 2018, the company had $84 million of remaining share repurchase authorization under this plan.
2018 Outlook Raised
The company now projects VITAS Healthcare revenue growth for 2018 in the range of 4.5- 5%, tightened from the previously provided band of 4-5%, prior to the Medicare Cap. Also, admissions are anticipated to improve 3.5-5% and Average Daily Census in 2018 is predicted to ascend 6.7%. Medicare Cap billing limitations are expected at around $1.3 million in the fourth quarter of 2018.
The Roto-Rooter business is now likely to augment 13-14% compared with the earlier-provided range of 12-13% for the full year. The view was backed by a 2% increase in job pricing, consistent growth in core plumbing plus drain cleaning services as well as revenue generation from water restoration services.
Full-year adjusted EPS is now envisioned to grow in the band of $11.80-$11.90 compared with the past forecast of $10.60-$10.85. The Zacks Consensus Estimate of $11.48 falls below the expected range.
Our Take
Chemed exited the third quarter on a solid note. Also, the company witnessed year-over-year growth in earnings and revenues. We are encouraged to note that the company’s subsidiaries saw a year-over-year revenue rise in the quarter under consideration. The expansion in adjusted operating margin buoys optimism. Further, the projection for 2018 hints at a brighter picture ahead.
However, reimbursement-related issues, seasonality in business, a competitive landscape and dependence on government mandates constantly pose challenges to the stock.
Zacks Rank & Key Picks
Chemed carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Humana Inc. (HUM - Free Report) and Inogen, Inc. (INGN - Free Report) .
Henry Schein is expected to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for adjusted EPS is $1.01 and for revenues, $3.35 billion. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Humana is likely to release third-quarter 2018 results on Nov 7. The Zacks Consensus Estimate for the quarterly EPS is pegged at $4.29 and for revenues, stands at $13.97 billion. The stock holds a Zacks Rank of 2.
Inogen is slated to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for EPS is pegged at 52 cents and for revenues, at $91.08 million. The stock sports a Zacks Rank #1 (Strong Buy).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>