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On Jun 7, 2016, we issued an updated research report on Chemed Corporation (CHE - Free Report) .
This Zacks Rank #3 (Hold) company commenced 2016 on a disappointing note with first-earnings lagging the Zacks Consensus Estimate while revenues met the same. Though issues related to admission coding changes remain a matter of concern, we are encouraged by the strong segmental performances at the company.
Chemed’s VITAS business had been in trouble over the past few quarters due to certain admission coding changes initiated by the Centers for Medicare & Medicaid Services (“CMS”). However, the company seems to have resolved these issues now and has successfully brought the segment back on its growth trajectory. Chemed reported that among the two key operating metrics, admissions and average daily census, the latter grew reasonably well in the first quarter.
We are also impressed with the performance of the Roto-Rooter business. According to Chemed, this growth was primarily the result of its decision to materially expand into the water restoration service segment. Water restoration is a remediation service that involves removing water and excess humidity – that often accumulates as a result of flooding – from a home or business.
During the first quarter, Chemed’s commercial drain cleaning revenue increased 10.6%, and commercial plumbing and excavation revenue inched up 0.9%, thereby resulting in 4.9% growth in Roto-Rooter’s overall commercial revenue. Water restoration services also continued to materially impact Roto-Rooter’s growth, which improved 23.3% in the quarter, thereby amounting to total residential water restoration revenues of $10.7 million.
We are also impressed with Chemed’s sound capital deployment policy that allows it to return greater value to investors through share buybacks and dividend payments. Nonetheless, headwinds like seasonality in business, a competitive landscape and dependence on government mandate are intimidating.
Key Picks from the Sector
Some better-ranked stocks worth considering in the same sector are LHC Group, Inc. , PharMerica Corporation and HEALTHSOUTH Corp. . While LHCG and PMC sport a Zacks Rank #1 (Strong Buy), HLS carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Chemed Posts Balanced Growth amid Coding Change Issues
On Jun 7, 2016, we issued an updated research report on Chemed Corporation (CHE - Free Report) .
This Zacks Rank #3 (Hold) company commenced 2016 on a disappointing note with first-earnings lagging the Zacks Consensus Estimate while revenues met the same. Though issues related to admission coding changes remain a matter of concern, we are encouraged by the strong segmental performances at the company.
Chemed’s VITAS business had been in trouble over the past few quarters due to certain admission coding changes initiated by the Centers for Medicare & Medicaid Services (“CMS”). However, the company seems to have resolved these issues now and has successfully brought the segment back on its growth trajectory. Chemed reported that among the two key operating metrics, admissions and average daily census, the latter grew reasonably well in the first quarter.
We are also impressed with the performance of the Roto-Rooter business. According to Chemed, this growth was primarily the result of its decision to materially expand into the water restoration service segment. Water restoration is a remediation service that involves removing water and excess humidity – that often accumulates as a result of flooding – from a home or business.
During the first quarter, Chemed’s commercial drain cleaning revenue increased 10.6%, and commercial plumbing and excavation revenue inched up 0.9%, thereby resulting in 4.9% growth in Roto-Rooter’s overall commercial revenue. Water restoration services also continued to materially impact Roto-Rooter’s growth, which improved 23.3% in the quarter, thereby amounting to total residential water restoration revenues of $10.7 million.
We are also impressed with Chemed’s sound capital deployment policy that allows it to return greater value to investors through share buybacks and dividend payments. Nonetheless, headwinds like seasonality in business, a competitive landscape and dependence on government mandate are intimidating.
Key Picks from the Sector
Some better-ranked stocks worth considering in the same sector are LHC Group, Inc. , PharMerica Corporation and HEALTHSOUTH Corp. . While LHCG and PMC sport a Zacks Rank #1 (Strong Buy), HLS carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>