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Chemed (CHE) Q2 Earnings & Revenues Top Estimates, Margins Up

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Chemed Corporation (CHE - Free Report) reported second-quarter 2021 adjusted earnings per share (EPS) of $4.60, up 4.3% year over year. The figure surpassed the Zacks Consensus Estimate by 3.4%.

The company’s GAAP EPS was $3.51, down 29.9% year over year.

Revenues in Detail

Revenues in the reported quarter improved 5.9% year over year to $532.3 million. The metric surpassed the Zacks Consensus Estimate by 0.8%.

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 second quarter, net revenues at VITAS totaled $311.9 million, down 4.7% year over year. This revenue decline was primarily led by a 6.3% decline in days-of-care, a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 1.8% and an acuity mix shift that reduced the blended average Medicare rate by approximately 90 basis points (bps).

Roto-Rooter reported sales of $220.3 million in the second quarter, up 26.1% year over year.

Total Roto-Rooter branch commercial revenues improved 31.8% on a 39.8% increase in drain cleaning revenues, 32.4% rise in commercial plumbing, 25.8% growth in excavation revenues and an 8.3% increase in commercial water restoration revenues.

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 Roto-Rooter branch residential revenues registered growth of 23.7% on a 20.6% rise in residential drain cleaning revenues, 30.7% improvement in plumbing, 22.4% increase in excavation and 23.1% growth in residential water restoration.

Margin in Detail

Gross profit rose 21.1% year over year to $181.8 million in the second quarter of 2021. Gross margin expanded 427 bps year over year to 34.2%, while the cost of products and services declined 0.5% in the second quarter of 2021.

Adjusted operating profit increased 34.2% from the year-ago period to $87.9 million. Adjusted operating margin expanded 347 bps to 16.5% despite an 11% rise in adjusted operating expenses.

Liquidity & Capital Structure

Chemed exited the second quarter of 2021 with cash and cash equivalents of $92.1 million, marking a significant decline from $210.2 million at the end of the first quarter. Similar to first-quarter 2021, there was no long-term debt at the end of second-quarter 2021.

Cumulative net cash provided by operating activities at the end of the second quarter of 2021 was $132 million compared with $277.8 million a year ago.

In the second quarter, Chemed’s management repurchased stocks for $122 million. As of Jun 30, 2021, there was approximately $312 million of share repurchase remaining under the existing plan.

Guidance 2021

Chemed has announced its revised financial guidance for 2021, taking into account the rapidly-changing business environment posed by the COVID-19 pandemic and the anticipated industry and macro-economic issues that can potentially impact the company’s business segments.

For 2021, VITAS revenues prior to Medicare Cap are estimated to decline approximately 4.5% from the prior year (initial guidance announced in February projected VITAS revenues prior to Medicare Cap to decline approximately 4.0% from the prior year). Roto-Rooter is forecasted to achieve 2021 revenue growth of 15% to 15.5% (Roto-Rooter was initially 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 share are estimated in the range of $18.20 to $18.50, up from the February-announced guidance of $17.00 to $17.50. The Zacks Consensus Estimate for the metric is pegged at $18.03.

Our Take

Chemed ended the second quarter of 2021 with better-than-expected earnings and revenues. Solid revenue growth across Roto-Rooter is encouraging, given the challenging business environment. Expansion of both margins is another upside. The strong full-year projection for Roto Rooter revenues as well as the company’s revised 2021 EPS estimate being above the Zacks Consensus Estimate buoys optimism. Chemed exited the second quarter of 2021 will no long-term debt, which again is a positive.

On the flip side, a decline in VITAS revenues during the reported quarter was discouraging. Deterioration in liquidity position and rising operating expenses are concerning. Reimbursement hampering top-line growth, business seasonality and a tough competitive landscape are other headwinds.

Zacks Rank & Key Picks

Chemed currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks which are likely to report earnings soon are AMN Healthcare Services Inc (AMN - Free Report) , Catalent, Inc. (CTLT - Free Report) and Globus Medical, Inc. (GMED - Free Report) , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for Catalent’s fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus estimate for its fourth-quarter revenues is pinned at $1.13 billion.

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus estimate for second-quarter revenues is pegged at $829.4 million.

For Globus Medical, the Zacks Consensus Estimate for its second-quarter 2021 adjusted EPS is currently pegged at 45 cents. The consensus estimate for its revenues stands at $226.96 million.