It has been about a month since the last earnings report for Chemed (CHE - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Chemed due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Chemed Q3 Earnings Surpass Estimates, Revenues Miss
Chemed reported third-quarter 2019 adjusted earnings per share of $3.46, up 12.7% year over year. The figure beat the Zacks Consensus Estimate by 4.5%.
On a GAAP basis, earnings per share were $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 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.
Chemed exited the third quarter of 2019 with cash and cash equivalents of $9.1 million, marking 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Chemed has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Chemed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.