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Chemed (CHE): Roto-Rooter Solid, Reimbursement a Concern
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On Dec 20, we issued an updated research report on Cincinnati, OH-based Chemed Corporation (CHE - Free Report) . The company currently operates two wholly-owned subsidiaries – VITAS Healthcare and Roto-Rooter.
In the last six months, Chemed outpaced the Zacks categorized Medical - Outpatient and Home Healthcare Sub industry with respect to price performance. The stock has a positive return of 21.3% for the period, way better than the 5% decline of the sub-industry. Even though the company’s third-quarter 2016 results were a mixed bag, the share price trend remained bullish on a solid top line.
Meanwhile, Chemed’s VITAS division had been in trouble over the past few quarters. Management claims that it is currently emphasizing on boosting the VITAS infrastructure. Thus, we can expect the VITAS business to boost the company’s top line going ahead.
Roto-Rooter is currently growing in U.S. It has reported sales of $110 million in the third quarter, up 8.4% year over year. The raised outlook for both the Roto-Rooter segment and bottom-line results is indicative of the fact that the company is anticipating improved operating results in the upcoming quarters.
On the flip side, reimbursement headwinds impacted the top line. CMS’ implementation of a refinement to the Medicare hospice reimbursement per diem eliminated the single-tier per diem for routine home care (RHC) and replaced it with a two-tiered rate which is considered to have adverse effect on the company’s sales.
Particularly, the VITAS segment saw sluggish growth in the quarter. The slashed outlook for this segment also shows that the negative impact of reimbursement in the Medicare hospice space has affected Chemed. Moreover, headwinds like seasonality in business and stiff competition continue to impede growth for Chemed.
Zacks Rank & Key Picks
Chemed has a Zacks Rank #4 (Sell). Better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical gained 14.6% over the last one year compared with the S&P 500’s 11.4%. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 17.2% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 111.3% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
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Chemed (CHE): Roto-Rooter Solid, Reimbursement a Concern
On Dec 20, we issued an updated research report on Cincinnati, OH-based Chemed Corporation (CHE - Free Report) . The company currently operates two wholly-owned subsidiaries – VITAS Healthcare and Roto-Rooter.
In the last six months, Chemed outpaced the Zacks categorized Medical - Outpatient and Home Healthcare Sub industry with respect to price performance. The stock has a positive return of 21.3% for the period, way better than the 5% decline of the sub-industry. Even though the company’s third-quarter 2016 results were a mixed bag, the share price trend remained bullish on a solid top line.
Meanwhile, Chemed’s VITAS division had been in trouble over the past few quarters. Management claims that it is currently emphasizing on boosting the VITAS infrastructure. Thus, we can expect the VITAS business to boost the company’s top line going ahead.
Roto-Rooter is currently growing in U.S. It has reported sales of $110 million in the third quarter, up 8.4% year over year. The raised outlook for both the Roto-Rooter segment and bottom-line results is indicative of the fact that the company is anticipating improved operating results in the upcoming quarters.
On the flip side, reimbursement headwinds impacted the top line. CMS’ implementation of a refinement to the Medicare hospice reimbursement per diem eliminated the single-tier per diem for routine home care (RHC) and replaced it with a two-tiered rate which is considered to have adverse effect on the company’s sales.
Particularly, the VITAS segment saw sluggish growth in the quarter. The slashed outlook for this segment also shows that the negative impact of reimbursement in the Medicare hospice space has affected Chemed. Moreover, headwinds like seasonality in business and stiff competition continue to impede growth for Chemed.
Zacks Rank & Key Picks
Chemed has a Zacks Rank #4 (Sell). Better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical gained 14.6% over the last one year compared with the S&P 500’s 11.4%. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 17.2% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 111.3% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>