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Ensign Group (ENSG) Up 2.4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·3 mins read

A month has gone by since the last earnings report for Ensign Group (ENSG). Shares have added about 2.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ensign Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ensign Group's Q2 Earnings Beat Estimates, Rise Y/Y

Ensign Group delivered adjusted operating earnings of 78 cents per share in second-quarter 2020, surpassing the Zacks Consensus Estimate by 36.8%. Further, the bottom line improved 44.4% year over year.
The company’s results benefited from improved revenues.

Operational Update

Total revenues of $584.7 million increased 1.6% year over year in the reported quarter. This improvement was driven by a solid segmental performance at Transitional and Skilled Services. Moreover, the top line beat the Zacks Consensus Estimate by 2%.

Further, adjusted net income in the quarter under review was $43.1 million, up 99% from the prior-year quarter.

Total revenues in the Transitional and Skilled Services, the only reporting segment of the company, came in at $556.7 million, up 18.7% year over year. Notably, the segment accounted for 95.2% of the total revenues in the reported quarter.

However, total expenses increased 14% year over year to $529.3 million due to higher cost of services, plus general and administrative expenses.

Financial Update

The company exited the second quarter with $201.7 million of cash and cash equivalents, up 241% from the level at 2019 end.

As of Jun 30, 2020, long-term debt less current maturities was $143.8 million, down 55.8% from the level at 2019 end.

Net cash from operating activities for the first six months of 2020 stands at $174.1 million, up 229.7% year over year.

Dividend Update

Ensign Group paid out a quarterly cash dividend of 5 cents per share during the second quarter.

2020 Guidance

Following solid second-quarter results, the company raised its 2020 annual earnings guidance to $3-$3.10 per share, up from the prior expectation of $2.50-$2.58 per share.

It still expects its annual revenues in the band of $2.42-$2.45 billion.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 28.3% due to these changes.

VGM Scores

At this time, Ensign Group has a nice Growth Score of B, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ensign Group has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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Zacks Investment Research