Back to top

Image: Bigstock

Chemed (CHE) Q4 Earnings Miss Estimates, 2021 Outlook Dull

Read MoreHide Full Article

Chemed Corporation (CHE - Free Report) reported fourth-quarter 2020 adjusted earnings per share (EPS) of $5.13, up 21.6% year over year. However, the figure lagged the Zacks Consensus Estimate by a penny.

The company’s GAAP EPS was $6.96, highlighting a 75.8% surge year over year.

Full-year adjusted EPS was $18.08, reflecting a 29.6% increase from the year-ago period. However, the figure was in line with the Zacks Consensus Estimate.

Revenues in Detail

Revenues in the reported quarter improved 2.1% year over year to $533.3 million. The metric lagged the Zacks Consensus Estimate by 0.1%.

Full-year revenues were $2.08 billion, reflecting a 7.3% increase from a year ago. However, the metric was in line with the Zacks Consensus Estimate.

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).

In the fourth quarter, net revenues at VITAS totaled $332 million, down 2.3% year over year. This revenue decline is comprised primarily of a 2.8% decline in days-of-care, a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 2.4%, and acuity mix shift that reduced the blended average Medicare rate increase approximately 255 basis points (bps). Further, the combination of lower Medicare Cap and a decrease in Medicaid net room and board pass-through drove revenue growth an additional 64 bps in the reported quarter.

Roto-Rooter reported sales of $201 million in the fourth quarter, up 10.2% year over year. On a unit-for-unit basis (excluding the Oakland and HSW acquisitions completed in July 2019 and September 2019, respectively), fourth-quarter Roto-Rooter revenues were $183 million, showing an increase of 12.8% year over year.

Chemed Corporation Price, Consensus and EPS Surprise


Chemed Corporation Price, Consensus and EPS Surprise

Chemed Corporation price-consensus-eps-surprise-chart | Chemed Corporation Quote

Total commercial revenues (excluding acquisitions) declined 9.8% on an 11.6% fall in drain cleaning revenues, an 8.9% decline in commercial plumbing and excavation revenues, and a 1% drop in commercial water restoration revenues.

Total residential revenues (excluding acquisitions) registered growth of 20.8% on a 17.1% rise in residential drain cleaning revenues, a 25.5% improvement in plumbing and excavation as well as a 16.8% increase in residential water restoration.

Margin in Detail

Gross profit rose 13.3% year over year to $198.2 million in the fourth quarter of 2020. Gross margin expanded 367 bps year over year to 37.2%, while cost of products and services declined 3.5% in the fourth quarter of 2020.

Adjusted operating profit increased 21.6% from the year-ago period to $111.4 million. Adjusted operating margin expanded 334 bps to 20.9% despite a 4.2% rise in adjusted operating expenses.

Operational Update

Chemed exited 2020 with cash and cash equivalents of $162.7 million, marking a significant improvement from $6.2 million at the end of 2019. There was no long-term debt at the end of 2020, while long-term debt at 2019-end was $90 million.

In the fourth quarter, Chemed’s management repurchased stocks for $28.5 million. As of Dec 30, 2020, there was approximately $178 million of share repurchase remaining under the existing plan.

Cumulative net cash provided by operating activities at the end of 2020 was $489.3 million compared with $301.2 million at the end of 2019.

Guidance 2021

Chemed has announced its financial guidance for 2021, taking the pandemic-led impact into consideration.

For 2021, VITAS revenues prior to Medicare Cap are estimated to decline approximately 4.0% from the prior year. Roto-Rooter is forecasted to achieve 2021 revenue growth of 5% to 6%. The Zacks Consensus Estimate for total revenues is pegged at $2.13 billion.

Full-year 2021 adjusted earnings per diluted share is estimated in the range of $17.00 to $17.50. The Zacks Consensus Estimate for the metric is pegged at $17.58.

Our Take

Chemed ended the fourth quarter of 2020 with lower-than expected numbers. However, the figures improved year over year. Solid revenue growth across Roto-Rooter Subsidiary is encouraging given the challenging business environment. Expansion of both margins buoy optimism. Chemed exited 2020 will no long-term debt, which is again a plus.

On the flip side, decline in VITAS revenues during the reported quarter is discouraging. Moreover, Chemed announced the financial guidance for 2021, projecting a decline in VITAS revenues through the year. Full-year adjusted earnings projection also falls below expectation.  Reimbursement hampering top-line growth, business seasonality and a tough competitive landscape are other concerns.

Zacks Rank & Key Picks

Chemed currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader medical space that have already announced their quarterly results are Abbott Laboratories (ABT - Free Report) , AngioDynamics, Inc. (ANGO - Free Report) and Hill-Rom Holdings, Inc. (HRC - Free Report) , each carrying  a Zacks Rank #2 (Buy).You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Worldwide sales of $10.7 billion in the quarter outpaced the consensus mark by 7.9%.

AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny against the Zacks Consensus Estimate of a loss per share of 2 cents. Revenues of $72.8 million beat the consensus mark by 8%.

Hill-Rom reported first-quarter fiscal 2021 adjusted EPS of $1.53, beating the Zacks Consensus Estimate by 45.7%. Revenues of $741.1 million surpassed the consensus mark by 13.2%.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>