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Chemed's (CHE) VITAS Segment Inks New Deal With Covenant Care
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Chemed’s (CHE - Free Report) wholly owned subsidiary, VITAS Healthcare Corporation, recently entered into an agreement to acquire all hospice operations and an assisted living facility from Covenant Health and Community Services, Inc. (Covenant). The aggregate purchase price of the transaction is fixed at $85 million.
The transaction is structured as an asset purchase and the parties will seek to close the same in second-quarter 2024, subject to certain regulatory and other approvals.
More on the News
VITAS stands to gain significantly with the addition of Covenant Care team members, enabling both organizations to make a positive impact in all the communities they serve. Covenant Care has a 44-year history of providing high-quality, patient-centered care across the communities in Florida and Alabama. This specifically includes the Tallahassee, Marianna, Fort Walton Beach, Panama City, Crestview and Pensacola markets in FL, and the Dothan and Mobile/Daphne markets in AL.
Image Source: Zacks Investment Research
Being a similar long-standing, mission-focused provider, VITAS is looking forward to building upon Covenant Care’s legacy by emphasizing its key values of putting patients, families and team members first. The agreement also marks a crucial milestone for Covenant Care, enabling it to broaden and deepen its focus on improving healthcare for the serving communities. This includes supporting new solutions and filling gaps in the care delivery system while continuing to deliver world-class hospice and palliative care with VITAS Healthcare’s expertise.
Industry Prospects
Per a research report, the U.S. hospice care market was valued at $37.9 billion in 2023 and is expected to witness a CAGR of 8.1% by 2030.
Market dynamics indicate that the demand for hospice services in the United States is expected to rise in the coming years due to increasing Medicare reimbursement for hospice and growing demand for end-of-life services.
Other Developments in the VITAS Segment
Of late, Chemed’s VITAS segment has been showing a consistent performance, owing to the strong adoption of its advanced hospice and palliative care services to its patients through a network of physicians, registered nurses, home health aides, social workers, clergy and volunteers. The company’s fourth-quarter 2023 results reflected a 13.6% year-over-year growth in VITAS’ net revenues, comprising an 11% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of 2.3% approximately.
Results also demonstrated continued improvement in VITAS’ operational metrics, which is an outcome of the12-month retention and hiring program launched in July 2022. The program was designed to stabilize turnover in the tenured staff and expand clinical workforce capacity. VITAS admissions increased 7% from the year-ago levels, continuing to drive higher patient census.
In addition, VITAS has generated sequential ADC (average daily census) growth in the past five quarters, surpassing the pre-pandemic all-time ADC high during the fourth quarter of 2023. Chemed remains highly optimistic about VITAS’ prospects in 2024 and beyond.
Price Performance
In the past six months, CHE shares have increased 26.2% compared with the industry’s growth of 17.4%.
Cardinal Health’s stock has risen 59.1% in the past year. Estimates for Cardinal Health’s fiscal 2024 and 2025 earnings per share (EPS) have risen from $7.17 and $7.94 to $7.28 and $8.03, respectively, in the past 30 days.
CAH’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 15.6%. In the last reported quarter, it posted an earnings surprise of 16.67%.
Estimates for Stryker’s 2024 EPS have increased from $11.84 to $11.86 in the past 30 days. Shares of the company have moved 30.7% upward in the past year compared with the industry’s growth of 10.8%.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
Estimates for DaVita’s 2024 EPS have moved from $8.46 to $8.97 in the past 30 days. Shares of the company have surged 81.9% in the past year compared with the industry’s 26.9% growth.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.57%. In the last reported quarter, it delivered an average earnings surprise of 22.22%.
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Chemed's (CHE) VITAS Segment Inks New Deal With Covenant Care
Chemed’s (CHE - Free Report) wholly owned subsidiary, VITAS Healthcare Corporation, recently entered into an agreement to acquire all hospice operations and an assisted living facility from Covenant Health and Community Services, Inc. (Covenant). The aggregate purchase price of the transaction is fixed at $85 million.
The transaction is structured as an asset purchase and the parties will seek to close the same in second-quarter 2024, subject to certain regulatory and other approvals.
More on the News
VITAS stands to gain significantly with the addition of Covenant Care team members, enabling both organizations to make a positive impact in all the communities they serve. Covenant Care has a 44-year history of providing high-quality, patient-centered care across the communities in Florida and Alabama. This specifically includes the Tallahassee, Marianna, Fort Walton Beach, Panama City, Crestview and Pensacola markets in FL, and the Dothan and Mobile/Daphne markets in AL.
Image Source: Zacks Investment Research
Being a similar long-standing, mission-focused provider, VITAS is looking forward to building upon Covenant Care’s legacy by emphasizing its key values of putting patients, families and team members first. The agreement also marks a crucial milestone for Covenant Care, enabling it to broaden and deepen its focus on improving healthcare for the serving communities. This includes supporting new solutions and filling gaps in the care delivery system while continuing to deliver world-class hospice and palliative care with VITAS Healthcare’s expertise.
Industry Prospects
Per a research report, the U.S. hospice care market was valued at $37.9 billion in 2023 and is expected to witness a CAGR of 8.1% by 2030.
Market dynamics indicate that the demand for hospice services in the United States is expected to rise in the coming years due to increasing Medicare reimbursement for hospice and growing demand for end-of-life services.
Other Developments in the VITAS Segment
Of late, Chemed’s VITAS segment has been showing a consistent performance, owing to the strong adoption of its advanced hospice and palliative care services to its patients through a network of physicians, registered nurses, home health aides, social workers, clergy and volunteers. The company’s fourth-quarter 2023 results reflected a 13.6% year-over-year growth in VITAS’ net revenues, comprising an 11% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of 2.3% approximately.
Results also demonstrated continued improvement in VITAS’ operational metrics, which is an outcome of the12-month retention and hiring program launched in July 2022. The program was designed to stabilize turnover in the tenured staff and expand clinical workforce capacity. VITAS admissions increased 7% from the year-ago levels, continuing to drive higher patient census.
In addition, VITAS has generated sequential ADC (average daily census) growth in the past five quarters, surpassing the pre-pandemic all-time ADC high during the fourth quarter of 2023. Chemed remains highly optimistic about VITAS’ prospects in 2024 and beyond.
Price Performance
In the past six months, CHE shares have increased 26.2% compared with the industry’s growth of 17.4%.
Zacks Rank and Other Key Picks
Chemed currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space are Cardinal Health (CAH - Free Report) , Stryker (SYK - Free Report) and DaVita (DVA - Free Report) . While Cardinal Health and Stryker each carry a Zacks Rank #2 at present, DaVita sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardinal Health’s stock has risen 59.1% in the past year. Estimates for Cardinal Health’s fiscal 2024 and 2025 earnings per share (EPS) have risen from $7.17 and $7.94 to $7.28 and $8.03, respectively, in the past 30 days.
CAH’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 15.6%. In the last reported quarter, it posted an earnings surprise of 16.67%.
Estimates for Stryker’s 2024 EPS have increased from $11.84 to $11.86 in the past 30 days. Shares of the company have moved 30.7% upward in the past year compared with the industry’s growth of 10.8%.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
Estimates for DaVita’s 2024 EPS have moved from $8.46 to $8.97 in the past 30 days. Shares of the company have surged 81.9% in the past year compared with the industry’s 26.9% growth.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.57%. In the last reported quarter, it delivered an average earnings surprise of 22.22%.