Back to top

Image: Bigstock

Chemed (CHE) Q4 Earnings Surpass Estimates, Margins Expand

Read MoreHide Full Article

Chemed Corporation (CHE - Free Report) reported adjusted earnings per share (EPS) of $6.60 in the fourth quarter of 2023, up 35% year over year. The figure also surpassed the Zacks Consensus Estimate by 5.6%.

The company’s GAAP EPS was $5.90, up 42.9% from last year’s reported figure. For the full year, the adjusted EPS was $20.30, reflecting an 8.1% increase from the year-ago period.

Revenues in Detail

Revenues in the reported quarter improved 7.2% year over year to $585.9 million. The metric missed the Zacks Consensus Estimate by 0.3%. Full-year revenues were $2.26 billion, up 6.1% from last year’s 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

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 fourth quarter, net revenues totaled $350 million, up 13.6% year over year.

The rise in revenues was primarily due to an 11% increase in days of care and a rise in the geographically weighted average Medicare reimbursement rate of nearly 2.3%.

Roto-Rooter

The segment reported sales of $235.9 million in the fourth quarter, down 1.1% year over year.

Total Roto-Rooter branch commercial revenues decreased 7.9% from the last year. This consisted of an 8.6% decline in drain cleaning revenues, a 6.3% fall in plumbing, a 5.9% decline in excavation and a 16.1% decrease in water restoration.

Total Roto-Rooter branch residential revenues registered an increase of 2% over the prior-year period. This consisted of a 1.4% increase in plumbing, excavation expanding by 4% and water restoration increasing by 8.6%, offset by a 5.6% decrease in drain cleaning.

Margins in Detail

The gross profit increased 15.5% year over year to $227.6 million in the fourth quarter of 2023. The gross margin expanded 279 basis points (bps) year over year to 38.8% despite a 2.5% increase in the cost of products and services.

The adjusted operating profit increased 26.9% from the year-ago period to $127.1 million. The adjusted operating margin expanded 338 bps to 21.7% despite an increase of 3.6% in adjusted operating expenses.

Liquidity & Capital Structure

Chemed exited the fourth quarter of 2023 with cash and cash equivalents of $264 million, which marked a significant increase from $74.2 million at the end of the fourth quarter of 2022. Meanwhile, the company did not have any long-term debt at the quarter end compared with $92.5 million at the end of the fourth quarter of 2022.

The cumulative net cash provided by operating activities at the end of the fourth quarter of 2023 was $330.3 million compared with $309.9 million in the year-ago period.

During the quarter, the company repurchased 79,512 shares of Chemed stock for $46 million, which equates to a cost per share of $579.09. As of Dec 30, 2023, there was approximately $314.1 million of remaining share repurchase authorization under its plan.

Chemed has a consistent dividend-paying history, with the five-year annualized dividend growth being 6.05%.

2024 Guidance

Chemed initiated its financial outlook for 2024.

The company anticipates 2024 revenues from VITAS, prior to Medicare Cap, to increase in the range of 9%-9.8% from the prior year.

Roto-Rooter is expected to achieve 2024 revenue growth in the range of 3.5%-4%.

For 2024, the Zacks Consensus Estimate for total revenues is pegged at $2.37 billion, suggesting 4.6% growth from the 2023 reported figure.

For the full-year 2024, the adjusted EPS is estimated in the range of $23.30-$23.70. The Zacks Consensus Estimate for the metric is pegged at $22.93, suggesting 12.9% growth over the 2023 adjusted figure.

Our Take

Chemed ended the fourth quarter of 2023 with better-than-expected earnings and revenues missing estimates. The company’s increased growth in licensed healthcare professionals, strong admissions and corresponding growth in the patient census has returned VITAS to normalized operating conditions. The expansion of both margins in the quarter is encouraging.

The Roto-Rooter segment continues to manage amid the ongoing headwinds in consumer sentiment and consumer spending within the economic sector. Chemed expects to continue gaining market share by leveraging Roto-Rooter's core competitive advantages in terms of excellent brand awareness, customer response time, 24/7 call centers and aggressive Internet presence.

Meanwhile, within Roto-Rooter, Chemed faced some demand issues with its commercial business similar to its residential business.

Zacks Rank and Key Picks

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

Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Cencora, Inc. (COR - Free Report) and Cardinal Health (CAH - Free Report) .

Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.

Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%. 

COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.

Cardinal Health, sporting a Zacks Rank #1, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.

CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.

Published in