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Chemed's (CHE) Q1 Earnings Top Estimates, Margins Increase

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Chemed Corporation (CHE - Free Report) reported first-quarter 2022 adjusted earnings per share (EPS) of $4.79, up 7.9% year over year. The figure surpassed the Zacks Consensus Estimate by 6.7%.

The company’s GAAP EPS was $4.22, registering a 5.2% rise year over year.

Revenues in Detail

Revenues in the reported quarter improved 0.6% year over year to $530.5 million. However, the metric missed the Zacks Consensus Estimate by 1.2%.

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 first quarter, net revenues at VITAS totaled $299.2 million, down 5.3% year over year. This revenue decline was primarily due to a 4.1% decline in days of care, partially offset by a geographically weighted average Medicare reimbursement rate increase of approximately 1.3%.

Chemed Corporation Price, Consensus and EPS Surprise

Chemed Corporation Price, Consensus and EPS Surprise

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

Roto-Rooter reported sales of $231.3 million in the first quarter, up 9.4% year over year.

Roto-Rooter branch commercial revenues in the quarter improved 14.4% year over year. This aggregate commercial revenue growth consisted of drain cleaning revenues, which rose 17%, along with an increase in plumbing revenues of 17.1%, a rise of 8.6% in water restoration revenues and a 7.1% increase in excavation.

Margin in Detail

Gross profit rose 3.8% year over year to $193.9 million in the first quarter of 2022. Gross margin expanded 113 basis points (bps) year over year to 36.6%, as the cost of products and services dipped 1.15% in the first quarter of 2022.

Adjusted operating profit increased 9.2% from the year-ago period to $104 million. Adjusted operating margin improved 154 bps to 19.6% on a 1.8% fall in adjusted operating expenses.

Liquidity & Capital Structure

Chemed exited the first quarter of 2022 with cash and cash equivalents of $18.2 million, marking a significant decline from $210.1 million at the end of 2021. Meanwhile, long-term debt at Q1 2022-end was $120 million against no long-term debt on the balance sheet at the end of 2021.

Cumulative net cash used by operating activities at the end of the first quarter of 2022 was $15 million compared with $489.3 million of cumulative net cash provided by operating activities a year ago.

In the first quarter, Chemed’s management repurchased stocks for $27.4 million. As of Mar 31, 2022, approximately $175 million remained under the existing share repurchase plan.

The company has a consistent dividend-paying history, with a five-year annualized dividend growth being 6.86%.

2022 Guidance

The company noted thatmanagement anticipates providing updated 2022 earnings guidance as part of the June 30, 2022, earnings press release.

Chemed earlier had announced its financial guidance for 2022, considering the rapidly changing business environment created by the COVID-19 pandemic as well as the anticipated industry and macro-economic issues that may affect the company’s business segments.

For 2022, VITAS revenues, prior to Medicare Cap, are estimated to decline in the range of 1.5-2.5% from the prior year. Roto-Rooter is forecast to achieve 2022 revenue growth in the range of 8.0-9.5%. The current Zacks Consensus Estimate for total revenues is pegged at $2.18 billion, suggesting 2.1% growth from the 2021 reported figure.

Full-year 2021 adjusted EPS is estimated in the range of $19.29 to $19.50. The Zacks Consensus Estimate for the metric is pegged at $19.29, indicating a 0.2% drop over the year-ago reported figure.

Our Take

Chemed ended the first quarter of 2022 with better-than-expected earnings. The year-over-year growth in revenues and adjusted EPS appears promising. Robust performance by the Roto-Rooter segment drove the top line. Expansion of gross and operating margins buoy optimism.

On the flip side, total revenues missed the mark. Once again, the company reported a decline in VITAS revenues. A decline in short-term cash level is another downside.

Zacks Rank

Chemed currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks from the broader Medical space include Meridian Bioscience, Inc. (VIVO - Free Report) , Owens & Minor (OMI - Free Report) and Vertex Pharmaceuticals Incorporated (VRTX - Free Report) , each carrying a Zacks Rank #2 (Buy).

Meridian Bioscience has an earnings yield of 5.2% compared with the industry’s 0.9%. Meridian Bioscience’s earnings surpassed estimates in three of the trailing four quarters, with the average surprise being 9.3%.

Meridian Bioscience is set to report third-quarter fiscal 2022 earnings on May 6.

Owens & Minor has a long-term historical growth rate of 16.9%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, the average surprise being 29.51%.

Owens & Minor is set to report first-quarter 2022 earnings on May 3.

Vertex Pharmaceuticals has an estimated long-term growth rate of 11.5%. Vertex Pharmaceuticals’ earnings surpassed estimates in the trailing four quarters, the average surprise being 10%.

Vertex Pharmaceuticals is scheduled to report first-quarter 2022 earnings on May 5.