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Ensign Group (ENSG) Down 14.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Ensign Group (ENSG). Shares have lost about 14.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ensign Group due for a breakout? 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 51 cents per share in second-quarter 2019, beating the Zacks Consensus Estimate by 2%. Moreover, the metric improved 24.4% year over year on the back of higher revenues.

Also, adjusted net income in the quarter under review was $30.3 million, up 27.8% from the prior-year quarter.

Operational Update

Total revenues of $575 million increased 14% year over year in the reported quarter. This upside was driven by solid segmental performances at Transitional and skilled services, Senior living services and Home health and hospice services. Moreover, the metric beat the Zacks Consensus Estimate by 0.5%.

Total Transitional and Skilled Services segment income was $56.7 million for the quarter under consideration, up 31.1% from the prior-year period.

Total Home Health and Hospice Services segment’s revenues rose 21.7% year over year to $50.2 million. Segment income for the same was up 16.6% year over year.

Total expenses escalated 15.8% year over year to $537 million due to higher cost of services plus general and administrative expenses.

Quarterly Segment Update

Transitional and Skilled Services


This segment generated revenues of $469 million, up 14.9% year over year. Notably, the segment accounted for 81.5% of the total revenues in the reported quarter.

Senior Living Services

This segment generated operating revenues of $42 million, up 14% year over year with the segment contributing 7.3% to the company’s top line.

Home Health & Hospice Services

Total operating revenues in this segment were $50 billion, up 22% year over year. The same represented 8.7% of the total revenues.

Other Services

This segment delivered revenues of $14 million, surging 50% from the prior-year quarter and reflecting 2.5% of the total revenue base.

Financial Update

The company exited the second quarter of 2019 with $39 million of cash and cash equivalents, up 44% year over year.

As of Jun 30, 2019, long-term debt less current maturities was $268 million, up 15% from the level at 2018 end.

For the first six months of 2019, net cash by operating activities stands at $72 million, down 29% year over year.

Business Update

In May, the company announced its plans to separate its home health and hospice agencies and substantially all of its senior living businesses into a separate publicly-traded company.

Dividend Update

Ensign Group paid out a quarterly cash dividend of 4.75 cents per share during the second quarter. The company has been hiking its dividend for the last 16 consecutive years.

2019 Outlook Reaffirmed

Following solid second-quarter earnings, management expects to maintain the metric’s earlier guidance of $2.22-$2.30. It also anticipates annual revenues between $2.34 billion and $2.40 billion.
 

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Ensign Group has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Ensign Group has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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