Chemed Corporation’s (CHE - Free Report) first-quarter 2018 adjusted earnings per share (EPS) were $2.72, compared with the year-ago $1.82. The figure surpassed the Zacks Consensus Estimate of $2.37.
Quarter in Details
Revenues in the quarter increased 8.2% year over year to $439.2 million, beating the Zacks Consensus Estimate of $420 million.
Chemed operates through two wholly-owned subsidiaries, namely, VITAS Healthcare Corporation (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing and drain cleaning service provider).
In the first quarter, net revenues at VITAS Healthcare totaled $292 million, reflecting an increase of 5.5% year over year. Revenues were driven by a 0.7% increase in the average net Medicare reimbursement rate and a 6.1% rise in average daily census. Further, a decrease in Medicare Cap drove revenues by 0.6%. However, this was partially offset by acuity mix shift which impacted revenues by 1.8%.
Chemed Corporation Price, Consensus and EPS Surprise
Roto-Rooter reported sales of $147.2 million in the first quarter, up 20.2% year over year. According to the company, revenues from water restoration increased 53.3% year over year to $27.7 million.
Gross margin expanded 90 basis points (bps) year over year to 30.7%. Adjusted operating margin also expanded 240 bps to 15% in the quarter owing to a 0.7% contraction in selling, general and administrative expenses to $69 million.
Chemed exited the first quarter of 2018 with total cash and cash equivalents of $13.7 million, up from $11.1 million at the end of 2017. The company had total debt of $132.5 million at the end of the first quarter, reflecting a sharp increase from $91.2 million at 2017-end. As of Mar 31, 2018, the company had approximately $244 million of undrawn borrowing capacity under its existing five-year credit agreement.
During the first quarter, the company repurchased shares worth $81.1 million. The board has authorized an additional $150 million for stock repurchase under Chemed’s existing plan. As of Mar 31, 2018, the company had $124.4 million of remaining share repurchase authorization under this plan.
2018 Outlook Intact
The company projects VITAS Healthcare revenue growth for 2018 in the range of 2.5% to 3.5%, prior to the Medicare Cap. Also, the admissions and Average Daily Census in 2018 are expected to increase 3% to 4%. Medicare Cap billing limitations are expected at around $5 million in 2018.
The Roto-Rooter business is likely to grow 4% to 5% in the full year. The guidance was backed by a 2% increase in job pricing and water restoration services growth.
Full-year adjusted EPS is expected to grow in the band of $10.60 to $10.85 as compared with $8.43 reported in 2017. The Zacks Consensus Estimate of $10.72 is within the guided range.
Our Take
Chemed exited the first quarter on a solid note. Also, the company witnessed year-over-year growth in both the fronts. Moreover, we are encouraged to note that the company’s subsidiaries saw year-over-year revenue growth in the quarter. The expansion in gross margin also buoys optimism.
Further, reimbursement-related issues, seasonality in business, a competitive landscape and dependence on government mandates continue to pose challenges.
Zacks Rank & Key Picks
Chemed carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical sector are Abaxis, Inc. , Bio-Rad Laboratories, Inc. (BIO - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp. While Abaxis and Bio-Rad sport a Zacks Rank #1 (Strong Buy), LabCorp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abaxis is expected to release fourth-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is pegged at 32 cents and for revenues stands at $67.2 million.
Bio-Rad is expected to report first-quarter 2018 results on May 3. The Zacks Consensus Estimate for adjusted EPS is 90 cents and for revenues is $530.4 million.
LabCorp is slated to release first-quarter 2018 results on Apr 25. The Zacks Consensus Estimate for adjusted EPS is $11.55 and for revenues is $11.48 billion.
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Chemed Corporation’s (CHE - Free Report) first-quarter 2018 adjusted earnings per share (EPS) were $2.72, compared with the year-ago $1.82. The figure surpassed the Zacks Consensus Estimate of $2.37.
Quarter in Details
Revenues in the quarter increased 8.2% year over year to $439.2 million, beating the Zacks Consensus Estimate of $420 million.
Chemed operates through two wholly-owned subsidiaries, namely, VITAS Healthcare Corporation (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing and drain cleaning service provider).
In the first quarter, net revenues at VITAS Healthcare totaled $292 million, reflecting an increase of 5.5% year over year. Revenues were driven by a 0.7% increase in the average net Medicare reimbursement rate and a 6.1% rise in average daily census. Further, a decrease in Medicare Cap drove revenues by 0.6%. However, this was partially offset by acuity mix shift which impacted revenues by 1.8%.
Chemed Corporation Price, Consensus and EPS Surprise
Roto-Rooter reported sales of $147.2 million in the first quarter, up 20.2% year over year. According to the company, revenues from water restoration increased 53.3% year over year to $27.7 million.
Gross margin expanded 90 basis points (bps) year over year to 30.7%. Adjusted operating margin also expanded 240 bps to 15% in the quarter owing to a 0.7% contraction in selling, general and administrative expenses to $69 million.
Chemed exited the first quarter of 2018 with total cash and cash equivalents of $13.7 million, up from $11.1 million at the end of 2017. The company had total debt of $132.5 million at the end of the first quarter, reflecting a sharp increase from $91.2 million at 2017-end. As of Mar 31, 2018, the company had approximately $244 million of undrawn borrowing capacity under its existing five-year credit agreement.
During the first quarter, the company repurchased shares worth $81.1 million. The board has authorized an additional $150 million for stock repurchase under Chemed’s existing plan. As of Mar 31, 2018, the company had $124.4 million of remaining share repurchase authorization under this plan.
2018 Outlook Intact
The company projects VITAS Healthcare revenue growth for 2018 in the range of 2.5% to 3.5%, prior to the Medicare Cap. Also, the admissions and Average Daily Census in 2018 are expected to increase 3% to 4%. Medicare Cap billing limitations are expected at around $5 million in 2018.
The Roto-Rooter business is likely to grow 4% to 5% in the full year. The guidance was backed by a 2% increase in job pricing and water restoration services growth.
Full-year adjusted EPS is expected to grow in the band of $10.60 to $10.85 as compared with $8.43 reported in 2017. The Zacks Consensus Estimate of $10.72 is within the guided range.
Our Take
Chemed exited the first quarter on a solid note. Also, the company witnessed year-over-year growth in both the fronts. Moreover, we are encouraged to note that the company’s subsidiaries saw year-over-year revenue growth in the quarter. The expansion in gross margin also buoys optimism.
Further, reimbursement-related issues, seasonality in business, a competitive landscape and dependence on government mandates continue to pose challenges.
Zacks Rank & Key Picks
Chemed carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical sector are Abaxis, Inc. , Bio-Rad Laboratories, Inc. (BIO - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp. While Abaxis and Bio-Rad sport a Zacks Rank #1 (Strong Buy), LabCorp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abaxis is expected to release fourth-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is pegged at 32 cents and for revenues stands at $67.2 million.
Bio-Rad is expected to report first-quarter 2018 results on May 3. The Zacks Consensus Estimate for adjusted EPS is 90 cents and for revenues is $530.4 million.
LabCorp is slated to release first-quarter 2018 results on Apr 25. The Zacks Consensus Estimate for adjusted EPS is $11.55 and for revenues is $11.48 billion.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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