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Chemed Corporation (CHE - Free Report) reported first-quarter 2020 adjusted earnings per share (EPS) of $3.68, up 26% year over year. The figure beat the Zacks Consensus Estimate by 2.2%.
The company’s GAAP EPS was $3.38, up 25.2% year over year.
Revenues in Detail
Revenues in the reported quarter improved 11.6% year over year to $515.8 million, which lagged the Zacks Consensus Estimate by 1.5%.
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).
Chemed Corporation Price, Consensus and EPS Surprise
In the first quarter, net revenues at VITAS totaled $337.9 million, reflecting a rise of 10.1% year over year. The top-line improvement was driven by a 5% increase in geographically weighted average Medicare reimbursement rate, 5.9% rise in days-of-care and acuity mix shift. However, decline in Medicare Cap, increase in Medicaid net room and board pass through and other contra revenue activity had minimal impact on revenue growth.
Roto-Rooter reported sales of $177.9 million in the first quarter, reflecting growth of 14.6% year over year. On a unit-for-unit basis, excluding the Oakland and HSW acquisitions completed in July and September 2019, the segment registered revenues of $158 million for the first quarter (a year-over-year increase of 1.6%).
Per the company, total commercial revenues (including acquisitions) registered growth of 20.1% on a 25% rise in drain cleaning revenues, and 20.1% improvement in commercial plumbing and excavation. However, commercial water restoration revenues declined 4.4%.
Total commercial revenues (excluding acquisitions) declined 3.5% due to flat year-over-year commercial drain cleaning revenues, a 4.3% fall in commercial plumbing and excavation revenues, and a 15.5% decline in commercial water restoration revenues.
Total residential revenues (including acquisitions) registered growth of 11.7% on an 18.5% rise in residential drain cleaning revenues, a 14.4% improvement in plumbing and excavation, and a 1% increase in residential water restoration.
Total residential revenues (excluding acquisitions) rose 2.4% due to a 4.1% growth in residential drain cleaning revenues, 4.4% increase in plumbing and excavation revenues. However, there was a 1.9% fall in residential water restoration revenues.
Margin in Detail
Gross profit rose 17.1% year over year to $164.1 million in the first quarter of 2020. Gross margin expanded 149 basis points (bps) year over year to 31.8%.
Adjusted operating profit grew 41.5% from the year-ago period to $93.5 million. Moreover, adjusted operating margin expanded 383 bps to 18.1% on a 4.7% decline in adjusted operating expenses.
Operational Update
Chemed exited the first quarter of 2020 with cash and cash equivalents of $28.9 million compared with $6.2 million at the end of 2019. Long-term debt at the end of first-quarter 2020 was $160 million compared with $90 million at 2019-end. On Mar 13, 2020, Chemed’s management authorized an additional $250 million for stock repurchase under the existing share repurchase program. As of Mar 31, there was approximately $254 million of share repurchase authorization remaining under this plan.
First-quarter net cash provided by operating activities was $89.3 million compared with $73.6 million a year ago.
Guidance
The management is likely to provide the 2020 earnings guidance in July 2020 as part of the second quarter earnings release.
Our Take
The first quarter of 2020 was a mixed one for Chemed. Notably, the company witnessed solid revenue growth across both key subsidiaries. Expansion in both margins in the quarter was also encouraging.
However, revenues lagging the consensus estimate along with the economic doldrums caused by the coronavirus pandemic affected the share price over the past few months. Reimbursement hampering top-line growth, business seasonality and a tough competitive landscape are other concerns.
The Zacks Consensus Estimate for ResMed’s third-quarter fiscal 2020 revenues is pegged at $715.6 million, suggesting a year-over-year improvement of 8.1%. The same for EPS stands at $1, indicating growth of 12.4% from the year-ago reported figure.
The Zacks Consensus Estimate for Aphria’s fourth-quarter fiscal 2020 revenues is $100.3 million, implying a 4.4% increase from the year-earlier reported figure.
The Zacks Consensus Estimate for ViewRay’s first-quarter 2020 bottom line stands at a loss of 20 cents per share, suggesting a 41.2% improvement from the year-ago quarter.
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Chemed's (CHE) Q1 Earnings Beat Estimates, Margins Improve
Chemed Corporation (CHE - Free Report) reported first-quarter 2020 adjusted earnings per share (EPS) of $3.68, up 26% year over year. The figure beat the Zacks Consensus Estimate by 2.2%.
The company’s GAAP EPS was $3.38, up 25.2% year over year.
Revenues in Detail
Revenues in the reported quarter improved 11.6% year over year to $515.8 million, which lagged the Zacks Consensus Estimate by 1.5%.
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).
Chemed Corporation Price, Consensus and EPS Surprise
Chemed Corporation price-consensus-eps-surprise-chart | Chemed Corporation Quote
In the first quarter, net revenues at VITAS totaled $337.9 million, reflecting a rise of 10.1% year over year. The top-line improvement was driven by a 5% increase in geographically weighted average Medicare reimbursement rate, 5.9% rise in days-of-care and acuity mix shift. However, decline in Medicare Cap, increase in Medicaid net room and board pass through and other contra revenue activity had minimal impact on revenue growth.
Roto-Rooter reported sales of $177.9 million in the first quarter, reflecting growth of 14.6% year over year. On a unit-for-unit basis, excluding the Oakland and HSW acquisitions completed in July and September 2019, the segment registered revenues of $158 million for the first quarter (a year-over-year increase of 1.6%).
Per the company, total commercial revenues (including acquisitions) registered growth of 20.1% on a 25% rise in drain cleaning revenues, and 20.1% improvement in commercial plumbing and excavation. However, commercial water restoration revenues declined 4.4%.
Total commercial revenues (excluding acquisitions) declined 3.5% due to flat year-over-year commercial drain cleaning revenues, a 4.3% fall in commercial plumbing and excavation revenues, and a 15.5% decline in commercial water restoration revenues.
Total residential revenues (including acquisitions) registered growth of 11.7% on an 18.5% rise in residential drain cleaning revenues, a 14.4% improvement in plumbing and excavation, and a 1% increase in residential water restoration.
Total residential revenues (excluding acquisitions) rose 2.4% due to a 4.1% growth in residential drain cleaning revenues, 4.4% increase in plumbing and excavation revenues. However, there was a 1.9% fall in residential water restoration revenues.
Margin in Detail
Gross profit rose 17.1% year over year to $164.1 million in the first quarter of 2020. Gross margin expanded 149 basis points (bps) year over year to 31.8%.
Adjusted operating profit grew 41.5% from the year-ago period to $93.5 million. Moreover, adjusted operating margin expanded 383 bps to 18.1% on a 4.7% decline in adjusted operating expenses.
Operational Update
Chemed exited the first quarter of 2020 with cash and cash equivalents of $28.9 million compared with $6.2 million at the end of 2019. Long-term debt at the end of first-quarter 2020 was $160 million compared with $90 million at 2019-end. On Mar 13, 2020, Chemed’s management authorized an additional $250 million for stock repurchase under the existing share repurchase program. As of Mar 31, there was approximately $254 million of share repurchase authorization remaining under this plan.
First-quarter net cash provided by operating activities was $89.3 million compared with $73.6 million a year ago.
Guidance
The management is likely to provide the 2020 earnings guidance in July 2020 as part of the second quarter earnings release.
Our Take
The first quarter of 2020 was a mixed one for Chemed. Notably, the company witnessed solid revenue growth across both key subsidiaries. Expansion in both margins in the quarter was also encouraging.
However, revenues lagging the consensus estimate along with the economic doldrums caused by the coronavirus pandemic affected the share price over the past few months. Reimbursement hampering top-line growth, business seasonality and a tough competitive landscape are other concerns.
Zacks Rank & Key Picks
Chemed currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are ResMed Inc. (RMD - Free Report) , Aphria Inc. and ViewRay, Inc. . All the three stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for ResMed’s third-quarter fiscal 2020 revenues is pegged at $715.6 million, suggesting a year-over-year improvement of 8.1%. The same for EPS stands at $1, indicating growth of 12.4% from the year-ago reported figure.
The Zacks Consensus Estimate for Aphria’s fourth-quarter fiscal 2020 revenues is $100.3 million, implying a 4.4% increase from the year-earlier reported figure.
The Zacks Consensus Estimate for ViewRay’s first-quarter 2020 bottom line stands at a loss of 20 cents per share, suggesting a 41.2% improvement from the year-ago quarter.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>