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Chemed (CHE) Up 4.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Chemed (CHE - Free Report) . Shares have added about 4.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Chemed 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 drivers.

Chemed Q3 Earnings and Revenues Surpass, Margins Rise

Chemed reported adjusted earnings per share of $5.32 in the third quarter of 2023, up 24.9% year over year. The figure also surpassed the Zacks Consensus Estimate by 8.1%.

The company’s GAAP EPS was $4.93, up 30.4% from last year’s reported figure.

Revenues in Detail

Revenues in the reported quarter improved 7.2% year over year to $564.5 million. The metric beat 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).

VITAS

In the third quarter, net revenues totaled $333.7 million, up 12.5% year over year. This figure compares with our model’s segmental projection of $331.1 million for the third quarter.

The rise in revenues was primarily due to a 9.4% increase in days of care and an increase in the geographically weighted average Medicare reimbursement rate of nearly 2.7%.

Roto-Rooter

The segment reported sales of $230.8 million in the third quarter, up 0.4% year over year. This figure compares with our model’s segmental projection of $227.4 million for the third quarter.

Total Roto-Rooter branch commercial revenues improved 1.5% from the last year, on a 1.8% rise in commercial plumbing, 11.9% growth in excavation revenues and a 2.0% hike in commercial water restoration revenues. This was offset by a 4.2% decrease in drain cleaning revenues.

Total Roto-Rooter branch residential revenues registered an increase of 0.3% over the prior-year period. This consisted of a 0.3% increase in plumbing, 3.2% growth in excavation and a 4.3% increase in water restoration, offset by a 6.7% decrease in drain cleaning.

Margins in Detail

The gross profit increased 12.6% year over year to $202.2 million in the third quarter of 2023. The gross margin expanded 171 basis points (bps) year over year to 35.8% despite an increase in the cost of products and services by 4.5% in the third quarter of 2023.

The adjusted operating profit increased 7.4% from the year-ago period to $102.6 million. The adjusted operating margin expanded 2 bps to 18.2% despite an increase of 18.6% in adjusted operating expenses.

Liquidity & Capital Structure

Chemed exited the third quarter of 2023 with cash and cash equivalents of $173.2 million, which marked a significant increase from $7.8 million at the end of the prior year’s comparable period. Meanwhile, the company did not have any long-term debt at the quarter end compared with $95.9 million at the end of the third quarter of 2022.

The cumulative net cash provided by operating activities at the end of the third quarter of 2023 was $221.7 million compared with $209.7 million in the year-ago period.

During the quarter, the company repurchased 28,457 shares of Chemed stock for $14.3 million which equates to a cost per share of $504.07. As of Sep 30, 2023, there was approximately $60 million of remaining share repurchase authorization under its plan.

Chemed has a consistent dividend-paying history, with the five-year annualized dividend growth being 6.04%.

2023 Guidance

Chemed provided updated 2023 guidance during the third-quarter earnings call.
The company anticipates 2023 revenues from VITAS, prior to Medicare Cap, to increase in the range of 9.3%-9.5% from the prior year (previously projected at 8.5%-9.5%).

Roto-Rooter is expected to achieve 2023 revenue growth in the range of 1.6-2% (previously 1).

For 2023, the Zacks Consensus Estimate for total revenues is pegged at $2.25 billion, suggesting 5.4% growth from the 2022 reported figure.

For the full-year 2023, the adjusted EPS is estimated in the range of $19.82-$20.02 (previously $19.90-$20.10). The Zacks Consensus Estimate for the metric is pegged at $19.96, suggesting 1.1% growth over the 2022 adjusted figure.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 8.89% due to these changes.

VGM Scores

Currently, Chemed has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Chemed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Chemed belongs to the Zacks Medical - Outpatient and Home Healthcare industry. Another stock from the same industry, Amedisys (AMED - Free Report) , has gained 3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Amedisys reported revenues of $556.24 million in the last reported quarter, representing a year-over-year change of -0.3%. EPS of $0.98 for the same period compares with $1.15 a year ago.

Amedisys is expected to post earnings of $1.04 per share for the current quarter, representing a year-over-year change of -10.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -3%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Amedisys. Also, the stock has a VGM Score of D.


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