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Chemed (CHE) Q3 Earnings Beat Estimates, Full-Year EPS View Up
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Chemed Corporation (CHE - Free Report) reported third-quarter 2021 adjusted earnings per share (EPS) of $5.06, up 4.1% year over year. The figure surpassed the Zacks Consensus Estimate by 13.5%.
The company’s GAAP EPS was $4.55, registering a 9.9% increase year over year.
Revenues in Detail
Revenues in the reported quarter improved 1.9% year over year to $538.7 million. The metric surpassed the Zacks Consensus Estimate by 1.3%.
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).
Chemed Corporation Price, Consensus and EPS Surprise
In the third quarter, net revenues at VITAS totaled $317.4 million, down 5.8% year over year. This revenue decline was primarily led by a 5.3% drop in days-of-care, a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration) of approximately 1.2% and an acuity mix shift that reduced the blended average Medicare rate by approximately 80 basis points (bps).
Roto-Rooter reported sales of $221.3 million in the third quarter, up 15.7% year over year.
Total Roto-Rooter branch commercial revenues improved 10% on a 17.6% increase in drain cleaning revenues, 9.3% rise in commercial plumbing, 1.3% decline in excavation revenues and a 9.4% hike in commercial water restoration revenues.
Total Roto-Rooter branch residential revenues registered growth of 17.2% on an 11.7% rise in residential drain cleaning revenues, 17.4% improvement in plumbing, 14.1% increase in excavation and 28% growth in residential water restoration.
Margin in Detail
Gross profit rose 3.9% year over year to $196.5 million in the third quarter of 2021. Gross margin expanded 69 bps year over year to 36.5%, while the cost of products and services rose 0.9% in the third quarter of 2021.
Adjusted operating profit increased 21.1% from the year-ago period to $107.2 million. Adjusted operating margin expanded 315 bps to 19.9%, on a 11.2% decline in adjusted operating expenses.
Liquidity & Capital Structure
Chemed exited the third quarter of 2021 with cash and cash equivalents of $28.7 million, marking a significant decline from $92.1 million at the end of the second quarter. Similar to second-quarter 2021, there was no long-term debt at the end of third-quarter 2021.
Cumulative net cash provided by operating activities at the end of the third quarter of 2021 was $245 million compared with $402.4 million a year ago.
In the third quarter, Chemed’s management repurchased stocks for $164 million. As of Sep 30, 2021, there was approximately $148 million of share repurchase remaining under the existing plan.
Chemed has updated its financial guidance for 2021, taking into account the rapidly changing business environment created by the ongoing COVID-19 pandemic as well as the anticipated industry and macro-economic issues that may affect the company’s business segments.
For 2021, VITAS revenues prior to Medicare Cap are estimated to decline approximately 5% from the prior year (initial guidance announced in July projected VITAS revenues prior to Medicare Cap to decline approximately 4.5% from the prior year). Roto-Rooter is forecasted to achieve 2021 revenue growth of 17.3% (up from the earlier guidance of 15-15.5%). The Zacks Consensus Estimate for total revenues is pegged at $2.14 billion, suggesting 2.8% growth from the 2020 reported figure.
Full-year 2021 adjusted earnings per share are estimated in the range of $19.00 to $19.20, signaling an improvement from the July-announced guidance of $18.20 to $18.50. The Zacks Consensus Estimate for the metric is pegged at $18.37, indicating 1.6% growth from the year-ago figure.
Our Take
Chemed ended the third quarter of 2021 on a bullish note with better-than-expected earnings and revenues. The robust revenue growth across Roto-Rooter is encouraging. Expansion of both margins is another upside. A decline in operating expenses during the quarter appears to be promising. The full-year strong projection for Roto Rooter revenue as well as the company’s revised 2021 EPS estimate exceeding Zacks expectation instill optimism. Chemed exited the third quarter of 2021 will no long-term debt, which is again a positive.
On the flip side, a decline in VITAS revenues during the reported quarter was discouraging. The company had to cut VITAS revenue growth expectations for the full year, indicating the persistence of this difficult situation. The deterioration in short-term cash levels is worrisome.
Zacks Rank and Other Key Picks
Chemed currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Thermo Fisher Scientific Inc. (TMO - Free Report) , SARTORIUS (SARTF - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .
Thermo Fisher, carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2021 adjusted EPS of $5.76, which beat the Zacks Consensus Estimate by 23.3%. Revenues of $9.33 billion outpaced the consensus mark by 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.
SARTORIUS reported third-quarter 2021 adjusted EPS of $2.55, surpassing the Zacks Consensus Estimate by 7.6%. Revenues of $1.06 billion surpassed the Zacks Consensus Estimate by 5.2%. It currently carries a Zacks Rank #1.
West Pharmaceutical reported third-quarter 2021 adjusted EPS of $2.06, which surpassed the Zacks Consensus Estimate by 13.2%. Revenues of $706.5 million outpaced the Zacks Consensus Estimate by 3.2%. It currently carries a Zacks Rank #2.
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Chemed (CHE) Q3 Earnings Beat Estimates, Full-Year EPS View Up
Chemed Corporation (CHE - Free Report) reported third-quarter 2021 adjusted earnings per share (EPS) of $5.06, up 4.1% year over year. The figure surpassed the Zacks Consensus Estimate by 13.5%.
The company’s GAAP EPS was $4.55, registering a 9.9% increase year over year.
Revenues in Detail
Revenues in the reported quarter improved 1.9% year over year to $538.7 million. The metric surpassed the Zacks Consensus Estimate by 1.3%.
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).
Chemed Corporation Price, Consensus and EPS Surprise
Chemed Corporation price-consensus-eps-surprise-chart | Chemed Corporation Quote
In the third quarter, net revenues at VITAS totaled $317.4 million, down 5.8% year over year. This revenue decline was primarily led by a 5.3% drop in days-of-care, a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration) of approximately 1.2% and an acuity mix shift that reduced the blended average Medicare rate by approximately 80 basis points (bps).
Roto-Rooter reported sales of $221.3 million in the third quarter, up 15.7% year over year.
Total Roto-Rooter branch commercial revenues improved 10% on a 17.6% increase in drain cleaning revenues, 9.3% rise in commercial plumbing, 1.3% decline in excavation revenues and a 9.4% hike in commercial water restoration revenues.
Total Roto-Rooter branch residential revenues registered growth of 17.2% on an 11.7% rise in residential drain cleaning revenues, 17.4% improvement in plumbing, 14.1% increase in excavation and 28% growth in residential water restoration.
Margin in Detail
Gross profit rose 3.9% year over year to $196.5 million in the third quarter of 2021. Gross margin expanded 69 bps year over year to 36.5%, while the cost of products and services rose 0.9% in the third quarter of 2021.
Adjusted operating profit increased 21.1% from the year-ago period to $107.2 million. Adjusted operating margin expanded 315 bps to 19.9%, on a 11.2% decline in adjusted operating expenses.
Liquidity & Capital Structure
Chemed exited the third quarter of 2021 with cash and cash equivalents of $28.7 million, marking a significant decline from $92.1 million at the end of the second quarter. Similar to second-quarter 2021, there was no long-term debt at the end of third-quarter 2021.
Cumulative net cash provided by operating activities at the end of the third quarter of 2021 was $245 million compared with $402.4 million a year ago.
In the third quarter, Chemed’s management repurchased stocks for $164 million. As of Sep 30, 2021, there was approximately $148 million of share repurchase remaining under the existing plan.
The company has a dividend payout ratio of 7% at present.
2021 Guidance Updated
Chemed has updated its financial guidance for 2021, taking into account the rapidly changing business environment created by the ongoing COVID-19 pandemic as well as the anticipated industry and macro-economic issues that may affect the company’s business segments.
For 2021, VITAS revenues prior to Medicare Cap are estimated to decline approximately 5% from the prior year (initial guidance announced in July projected VITAS revenues prior to Medicare Cap to decline approximately 4.5% from the prior year). Roto-Rooter is forecasted to achieve 2021 revenue growth of 17.3% (up from the earlier guidance of 15-15.5%). The Zacks Consensus Estimate for total revenues is pegged at $2.14 billion, suggesting 2.8% growth from the 2020 reported figure.
Full-year 2021 adjusted earnings per share are estimated in the range of $19.00 to $19.20, signaling an improvement from the July-announced guidance of $18.20 to $18.50. The Zacks Consensus Estimate for the metric is pegged at $18.37, indicating 1.6% growth from the year-ago figure.
Our Take
Chemed ended the third quarter of 2021 on a bullish note with better-than-expected earnings and revenues. The robust revenue growth across Roto-Rooter is encouraging. Expansion of both margins is another upside. A decline in operating expenses during the quarter appears to be promising. The full-year strong projection for Roto Rooter revenue as well as the company’s revised 2021 EPS estimate exceeding Zacks expectation instill optimism. Chemed exited the third quarter of 2021 will no long-term debt, which is again a positive.
On the flip side, a decline in VITAS revenues during the reported quarter was discouraging. The company had to cut VITAS revenue growth expectations for the full year, indicating the persistence of this difficult situation. The deterioration in short-term cash levels is worrisome.
Zacks Rank and Other Key Picks
Chemed currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Thermo Fisher Scientific Inc. (TMO - Free Report) , SARTORIUS (SARTF - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .
Thermo Fisher, carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2021 adjusted EPS of $5.76, which beat the Zacks Consensus Estimate by 23.3%. Revenues of $9.33 billion outpaced the consensus mark by 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.
SARTORIUS reported third-quarter 2021 adjusted EPS of $2.55, surpassing the Zacks Consensus Estimate by 7.6%. Revenues of $1.06 billion surpassed the Zacks Consensus Estimate by 5.2%. It currently carries a Zacks Rank #1.
West Pharmaceutical reported third-quarter 2021 adjusted EPS of $2.06, which surpassed the Zacks Consensus Estimate by 13.2%. Revenues of $706.5 million outpaced the Zacks Consensus Estimate by 3.2%. It currently carries a Zacks Rank #2.