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The Ensign Group (ENSG) Down 7.8% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for The Ensign Group, Inc. (ENSG - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

The Ensign Group Q1 Earnings Meet Estimates, Fall Y/Y

The Ensign Group reported first-quarter 2017 adjusted operating earnings of $0.31 per share, in line with the Zacks Consensus Estimate. Earnings and declined 3.1% year over year.

Operational Update

Total revenue of $441.7 million increased nearly 15% year over year in the first quarter and also surpassed the Zacks Consensus Estimate by 1.4%.

Total expenses at the end of the first quarter rose 18% year over year to $434.2 million due to higher cost of services, General & Administrative expenses and Depreciation & Amortization costs.

Quarterly Segment Update

The Transitional, Skilled & Assisted Living (TSA) Services Segment:

The segment reported revenues of $404.7 million, up 17.4% year over year. Solid growth in skilled nursing and facilities drove the upside. Notably, the segment accounted for 91.6% of the total revenue in the first quarter.

Home Health & Hospice Services

For this segment, total operating revenue was $32.1 billion, up 18.5% year over year. Strong growth in home health services resulted in the improvement. This segment contributed 7.3% to the total revenue.

Other Services

This segment reported revenues of $4.9 million, down 54.5% from the prior-year quarter. This segment accounted for 1.1% of the total revenue.

Financial Update

Total cash and cash equivalents decreased 39% to $31.5 million as of Mar 31, 2017 from $57.7 million as of Dec 31, 2016.

Cash from operations was $19.6 million, up 54.3% year over year.

As of Mar 31, 2017, long-term debt was $258.5 million, down 6.2% from $275.5 million at the end of 2016. 

Share Repurchase and Dividend Update

The Ensign Group paid $0.0425 per share of its common stock to shareholders through dividends during the quarter.

Guidance Affirmed for 2017

Management expects annual revenues in the range of $1.76–$1.80 billion. It had earlier projected revenues in the range of $1.818–$1.842 billion.

Annual earnings are now expected in the range $1.46–$1.53 per diluted share compared with $1.62–$1.70 per diluted share guided previously.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

The Ensign Group, Inc. Price and Consensus

VGM Scores

At this time, The Ensign Group's stock has an average Growth Score of 'C', though it lags a bit on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.

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

Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.

Outlook

The stock has a Zacks Rank #4 (Sell). We expect below average returns from the stock in the next few months.


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