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Here's Why You Should Hold on to Chemed (CHE) Stock Right Now
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Chemed Corporation (CHE - Free Report) has been gaining investors’ confidence on consistently positive results. Over the past year, the company’s shares have outperformed its industry. The stock has gained 39.1% against a 5.1% decline of the industry. Also, the company has outperformed the S&P 500’s 7.5% growth during the same period.
The renowned hospice care provider has a market cap of $6.65 billion. The company’s five-year projected growth rate looks impressive at 10.8%. It is expected to scale new highs in the near term. The company has average positive earnings surprise of 4.8% for the trailing four quarters.
With solid prospects, the Zacks Rank #3 (Hold) company is worth the wait for now.
What Makes the Stock an Attractive Pick?
Segmental Growth Robust: We are upbeat about the company’s consistent topline performance, which once again exhibited robust growth within VITAS and Roto-Rooter arms in the second quarter of 2019 on strong domestic sales. It anticipates sustaining this positive momentum on continued expansion of its plumbing and drain cleaning service segments. Chemed also experienced robust growth in the water restoration service in the second quarter of 2019.
Acquisitions and Partnerships to Add Value: We are looking forward to the company’s recently-formed alliance with HSW RR franchise operations and Western Drain Supply. The acquisition deal, completed in August 2019, will likely boost productivity, market share and profitability of Chemed.
In another development, acquisitions of the franchise territory, serving Alameda County, and portions of Southwestern San Joaquin County, CA, are likely to aid the company. This is because these acquisitions are immediately accretive and will not need months of re-engineering and infrastructure realignment to make them functional, thereby saving costs.
Raised Guidance Buoys Optimism: Banking on strong second-quarter performance, Chemed recently raised its 2019 adjusted earnings per share guidance to $13.65 -$13.85, whereas it reported $11.93 reported in the year-ago period. The Zacks Consensus Estimate for earnings of $13.76 remained within the company’s projected range. This indicates that Chemed will likely be able to maintain the ongoing bullish momentum for the rest of the year.
Downsides
Reimbursement Scenario Tough: The reforms by the Centers for Medicare & Medicaid Services (“CMS”) in Medicare hospice reimbursement per diem hampered topline growth for the company. The reforms were brought about keeping in mind the high costs of reimbursement under routine home care. The company’s sales were affected due to this restructuring.
Landscape Competitive: Chemed operates in a highly competitive market, with respect to the hospice care provider industry, which includes the local and regional firms. As the hospice care industry is highly fragmented, VITAS is currently competing with a large number of organizations on its ability to deliver quality, responsive services. This is concerning for the company.
Which Way Are Estimates Heading?
The estimate revision trend of the company for 2019 is impressive. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved up 7.8% to $13.76.
The Zacks Consensus Estimate for its 2019 revenues is pegged at $1.94 billion, suggesting an 8.9% rise from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space are Omeros Corporation (OMER - Free Report) , Haemonetics Corporation (HAE - Free Report) and Surmodics, Inc (SRDX - Free Report) .
Haemonetics, with a Zacks Rank #2, has a long-term earnings growth rate of 13.5%.
Surmodics’s long-term earnings growth rate is projected at 10%. The stock currently sports a Zacks Rank of 1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Here's Why You Should Hold on to Chemed (CHE) Stock Right Now
Chemed Corporation (CHE - Free Report) has been gaining investors’ confidence on consistently positive results. Over the past year, the company’s shares have outperformed its industry. The stock has gained 39.1% against a 5.1% decline of the industry. Also, the company has outperformed the S&P 500’s 7.5% growth during the same period.
The renowned hospice care provider has a market cap of $6.65 billion. The company’s five-year projected growth rate looks impressive at 10.8%. It is expected to scale new highs in the near term. The company has average positive earnings surprise of 4.8% for the trailing four quarters.
With solid prospects, the Zacks Rank #3 (Hold) company is worth the wait for now.
What Makes the Stock an Attractive Pick?
Segmental Growth Robust: We are upbeat about the company’s consistent topline performance, which once again exhibited robust growth within VITAS and Roto-Rooter arms in the second quarter of 2019 on strong domestic sales. It anticipates sustaining this positive momentum on continued expansion of its plumbing and drain cleaning service segments. Chemed also experienced robust growth in the water restoration service in the second quarter of 2019.
Acquisitions and Partnerships to Add Value: We are looking forward to the company’s recently-formed alliance with HSW RR franchise operations and Western Drain Supply. The acquisition deal, completed in August 2019, will likely boost productivity, market share and profitability of Chemed.
In another development, acquisitions of the franchise territory, serving Alameda County, and portions of Southwestern San Joaquin County, CA, are likely to aid the company. This is because these acquisitions are immediately accretive and will not need months of re-engineering and infrastructure realignment to make them functional, thereby saving costs.
Raised Guidance Buoys Optimism: Banking on strong second-quarter performance, Chemed recently raised its 2019 adjusted earnings per share guidance to $13.65 -$13.85, whereas it reported $11.93 reported in the year-ago period. The Zacks Consensus Estimate for earnings of $13.76 remained within the company’s projected range. This indicates that Chemed will likely be able to maintain the ongoing bullish momentum for the rest of the year.
Downsides
Reimbursement Scenario Tough: The reforms by the Centers for Medicare & Medicaid Services (“CMS”) in Medicare hospice reimbursement per diem hampered topline growth for the company. The reforms were brought about keeping in mind the high costs of reimbursement under routine home care. The company’s sales were affected due to this restructuring.
Landscape Competitive: Chemed operates in a highly competitive market, with respect to the hospice care provider industry, which includes the local and regional firms. As the hospice care industry is highly fragmented, VITAS is currently competing with a large number of organizations on its ability to deliver quality, responsive services. This is concerning for the company.
Which Way Are Estimates Heading?
The estimate revision trend of the company for 2019 is impressive. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved up 7.8% to $13.76.
The Zacks Consensus Estimate for its 2019 revenues is pegged at $1.94 billion, suggesting an 8.9% rise from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space are Omeros Corporation (OMER - Free Report) , Haemonetics Corporation (HAE - Free Report) and Surmodics, Inc (SRDX - Free Report) .
Omeros’ long-term earnings growth rate is estimated at 21.1%. The stock carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics, with a Zacks Rank #2, has a long-term earnings growth rate of 13.5%.
Surmodics’s long-term earnings growth rate is projected at 10%. The stock currently sports a Zacks Rank of 1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>