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Why Is Ensign Group (ENSG) Up 28% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ensign Group (ENSG - Free Report) . Shares have added about 28% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ensign Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Ensign Group's Q3 Earnings Beat Estimates, Rise Y/Y

Ensign Group delivered adjusted operating earnings of 78 cents per share in third-quarter 2020, surpassing the Zacks Consensus Estimate by 8.3%. Further, the bottom line improved 41.8% year over year.

The company’s results benefited from revenues.

Operational Update

Total revenues of $599 million increased 17% year over year in the reported quarter. However, the top line missed the Zacks Consensus Estimate by 0.2%.

Further, adjusted net income in the quarter under review was $43.7 million, up 94.5% from the prior-year quarter.

Total revenues in the Transitional and Skilled Services, the only reporting segment of the company, came in at $570.3 million, up 17.4% year over year. Notably, the segment accounted for 95% of the total revenues in the reported quarter.

However, total expenses increased 13.1% year over year to $544 million due to higher cost of services plus general and administrative expenses.

Financial Update

The company exited the third quarter with $175.4 million of cash and cash equivalents, up 196.4% from the level at 2019 end.

As of Sep 30, 2020, long-term debt less current maturities was $113.2 million, down 65.2% from the level at 2019 end.

Net cash from operating activities for the first nine months of 2020 summed $282.2 million, up 158.7% year over year.

Dividend Update

Ensign Group paid out a quarterly cash dividend of 5 cents per share during the third quarter.

2020 and 2021 Guidance

Following solid third-quarter results, the company raised its 2020 annual earnings guidance to $3.04-$3.12 per share, up from the prior expectation of $3-$3.10.

It still expects its annual revenues in the band of $2.42-$2.45 billion.

Management also provided its 2021 outlook. It expects annual EPS from $3.44 to $3.56 while annual revenues are projected between $2.62 billion and $2.69 billion.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Ensign Group has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Ensign Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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