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Chemed (CHE) Q3 Earnings Surpass Estimates, Revenues Miss
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Chemed Corporation (CHE - Free Report) reported third-quarter 2019 adjusted earnings per share (EPS) of $3.46, up 12.7% year over year. The figure beat the Zacks Consensus Estimate by 4.5%.
Its reported EPS was $3.56, up 16.3% year over year.
Revenues in the reported quarter improved 8.2% year over year to $480.6 million but missed the Zacks Consensus Estimate by 0.8%.
Chemed Corporation Price, Consensus and EPS Surprise
Chemed operates through two wholly-owned subsidiaries, namely, VITAS (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing plus drain cleaning service provider).
In the third quarter, net revenues at VITAS totaled $321.7 million, reflecting rise of 6.6% year over year. The top-line improvement was driven by 0.5% growth in geographically weighted average Medicare reimbursement rate and 6.3% rise in days-of-care. A reduction in Medicare Cap liability boosted revenue improvement by 0.2%. Revenue growth was impacted by acuity mix shift, fluctuations in net room and board and contractual adjustments, the combination of which led to a revenue decline of 0.4% from the prior-year quarter.
Roto-Rooter reported sales of $158.9 million in the third quarter, reflecting growth of 11.6% year over year. Per the company, revenues from water restoration grew 3% year over year to $25.7 million. The upside was driven by 19.3% year-over-year growth in commercial revenues and 6.5% rise in residential revenues.
Margin in Detail
Gross profit rose 9.8% year over year to $152.4 million in the third quarter of 2019. Gross margin expanded 46 basis points (bps) year over year to 31.7%. Adjusted operating profit grew 5.5% from the year-ago period to $75.6 million. However, the adjusted operating margin contracted 41 bps to 15.8% on 14.4% escalation in adjusted operating expenses.
Operational Update
Chemed exited the third quarter of 2019 with cash and cash equivalents of $9.1 million, a significant improvement from $3.3 million at the end of the second quarter. The company had long-term debt of $130 million at the end of the third quarter, which rose from $85 million at the end of the second quarter. During the third quarter, the company repurchased shares worth $125 million.
Year-to-date net cash provided by operating activities was $237.6 million compared with $230.6 million at the end of the year-ago period.
Our Take
Chemed exited the third quarter of 2019 on a mixed note, as earnings beat estimates, while revenues missed the same. It is encouraging to note that the company witnessed solid revenue growth across both key subsidiaries. Expansion in the gross margin during the quarter buoys optimism.
However, unfavorable acuity mix shift, fluctuations in net room and board and contractual adjustments dented the top line in the quarter.
Zacks Rank & Key Picks
Currently, Chemed carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical space are ResMed, Inc (RMD - Free Report) , Edwards Lifesciences Corporation (EW - Free Report) and Thermo Fisher Scientific Inc (TMO - Free Report) .
ResMed, currently carrying a Zacks Rank #2, reported first-quarter fiscal 2020 adjusted EPS of 93 cents, surpassing the Zacks Consensus Estimate by 6.9%. Its revenues of $681.1 million outpaced the consensus mark by 3.7%.
Edwards Lifesciences, presently carrying a Zacks Rank #2, posted third-quarter 2019 adjusted EPS of $1.41, surpassing the Zacks Consensus Estimate by 15.6%. Its revenues totaled $1.09 billion, which surpassed the consensus estimate of $1.04 billion by 5.3%.
Thermo Fisher, with a Zacks Rank #2, delivered third-quarter 2019 adjusted EPS of $2.94, beating the Zacks Consensus Estimate by 2.1%. Its revenues of $6.27 billion surpassed the Zacks Consensus Estimate by 1.3%.
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Chemed (CHE) Q3 Earnings Surpass Estimates, Revenues Miss
Chemed Corporation (CHE - Free Report) reported third-quarter 2019 adjusted earnings per share (EPS) of $3.46, up 12.7% year over year. The figure beat the Zacks Consensus Estimate by 4.5%.
Its reported EPS was $3.56, up 16.3% year over year.
Revenues in the reported quarter improved 8.2% year over year to $480.6 million but missed the Zacks Consensus Estimate by 0.8%.
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, namely, VITAS (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing plus drain cleaning service provider).
In the third quarter, net revenues at VITAS totaled $321.7 million, reflecting rise of 6.6% year over year. The top-line improvement was driven by 0.5% growth in geographically weighted average Medicare reimbursement rate and 6.3% rise in days-of-care. A reduction in Medicare Cap liability boosted revenue improvement by 0.2%. Revenue growth was impacted by acuity mix shift, fluctuations in net room and board and contractual adjustments, the combination of which led to a revenue decline of 0.4% from the prior-year quarter.
Roto-Rooter reported sales of $158.9 million in the third quarter, reflecting growth of 11.6% year over year. Per the company, revenues from water restoration grew 3% year over year to $25.7 million. The upside was driven by 19.3% year-over-year growth in commercial revenues and 6.5% rise in residential revenues.
Margin in Detail
Gross profit rose 9.8% year over year to $152.4 million in the third quarter of 2019. Gross margin expanded 46 basis points (bps) year over year to 31.7%. Adjusted operating profit grew 5.5% from the year-ago period to $75.6 million. However, the adjusted operating margin contracted 41 bps to 15.8% on 14.4% escalation in adjusted operating expenses.
Operational Update
Chemed exited the third quarter of 2019 with cash and cash equivalents of $9.1 million, a significant improvement from $3.3 million at the end of the second quarter. The company had long-term debt of $130 million at the end of the third quarter, which rose from $85 million at the end of the second quarter. During the third quarter, the company repurchased shares worth $125 million.
Year-to-date net cash provided by operating activities was $237.6 million compared with $230.6 million at the end of the year-ago period.
Our Take
Chemed exited the third quarter of 2019 on a mixed note, as earnings beat estimates, while revenues missed the same. It is encouraging to note that the company witnessed solid revenue growth across both key subsidiaries. Expansion in the gross margin during the quarter buoys optimism.
However, unfavorable acuity mix shift, fluctuations in net room and board and contractual adjustments dented the top line in the quarter.
Zacks Rank & Key Picks
Currently, Chemed carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical space are ResMed, Inc (RMD - Free Report) , Edwards Lifesciences Corporation (EW - Free Report) and Thermo Fisher Scientific Inc (TMO - Free Report) .
ResMed, currently carrying a Zacks Rank #2, reported first-quarter fiscal 2020 adjusted EPS of 93 cents, surpassing the Zacks Consensus Estimate by 6.9%. Its revenues of $681.1 million outpaced the consensus mark by 3.7%.
Edwards Lifesciences, presently carrying a Zacks Rank #2, posted third-quarter 2019 adjusted EPS of $1.41, surpassing the Zacks Consensus Estimate by 15.6%. Its revenues totaled $1.09 billion, which surpassed the consensus estimate of $1.04 billion by 5.3%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher, with a Zacks Rank #2, delivered third-quarter 2019 adjusted EPS of $2.94, beating the Zacks Consensus Estimate by 2.1%. Its revenues of $6.27 billion surpassed the Zacks Consensus Estimate by 1.3%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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