Ensign Group (ENSG) Down 7.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Ensign Group (ENSG). Shares have lost about 7.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Ensign Group Beats on Q1 Earnings, Hikes '23 EPS View
Ensign Group reported first-quarter 2023 adjusted operating earnings of $1.13 per share, which outpaced the Zacks Consensus Estimate by 2.7% and our estimate of $1.08. The bottom line climbed 14.1% year over year.
Operating revenues amounted to $886.8 million, which rose 24.3% year over year in the quarter under review. The top line beat the consensus mark by 4.8%. The metric benefited from improved skilled services and rental revenues.
The quarterly results were aided by solid segmental contributions and growing patient volumes. However, an elevated expense level is expected to have acted as a drag on ENSG’s results.
Q1 Update
ENSG reported an adjusted net income of $64.6 million in the fi quarter, which improved 14.6% year over year.
Same-store occupancy grew 4.2% year over year, while transitioning occupancy increased 5.4% year over year.
Total expenses of $812 million escalated 26% year over year in the quarter under review and beat our estimate of $765.3 million. The year-over-year increase resulted from the higher cost of services, rent-cost of services, general and administrative expenses, and depreciation and amortization.
Segmental Update
Skilled Services: The segment’s revenues of $850.9 million climbed 23.9% year over year. Segmental income grew 15.4% year over year to $113.3 million in the first quarter.
Skilled nursing and campus operations of the segment totaled 253 and 26, respectively, at the first-quarter end.
Standard Bearer: Rental revenues were $19.7 million in the segment, which rose 14.7% year over year. Segmental income of $7.2 million increased 4.6% year over year.
Funds from Operations (FFO) grew 10.6% year over year to $13.2 million in the quarter under review.
Financial Update (as of Mar 31, 2023)
Ensign Group exited the first quarter with cash and cash equivalents of $327 million, which increased 3.4% from the 2022-end level.
Total assets of $3,862.2 million grew 11.9% from the figure at 2022 end.
Long-term debt-less current maturities amounted to $148.3 million. The figure dipped 0.6% from the figure as of Dec 31, 2022. Short-term debt totaled $3.9 million.
Total equity of $1,319.8 million rose 5.7% from the 2022-end figure.
In the reported quarter, ENSG generated operating cash flows of $48.3 million, which increased 5.4% year over year.
Capital-Deployment Update
Ensign Group did not buy back shares in the first quarter as part of the share repurchase program authorized by management in July 2022.
It paid out a quarterly dividend of 5.75 cents per share.
2023 Outlook
Revenues are anticipated between $3.68 billion and $3.73 billion, up from the prior mentioned $3.55-$3.62 billion. The mid-point of the revised guidance indicates an improvement of 22.5% from the 2022 figure.
Earnings per share are forecast to be $4.64-$4.77 this year, higher than the earlier mentioned $4.60-$4.74. The mid-point of the updated outlook suggests 13.8% growth from the reported figure of 2022.
The weighted average common shares outstanding is estimated at 57.7 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Ensign Group has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 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 broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, 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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The Ensign Group, Inc. (ENSG) : Free Stock Analysis Report
