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Here's Why You Should Invest in Chemed (CHE) Stock Right Now

Zacks Equity Research

Chemed Corporation CHE has been gaining investors’ confidence, courtesy of its strength in core business segments and strong projections for 2019.

In the past six months, the stock has gained 4.8% versus the industry’s 9.9% decline.

What’s Working in Favor of Chemed?

Segmental Strength: Chemed operates through two wholly-owned subsidiaries — VITAS (a major provider of end-of-life care) and Roto-Rooter (a leading commercial and residential plumbing plus drain cleaning service provider) — each of which has been driving the top line.

VITAS net revenues in the last reported quarter increased 4.9% year over year. In fact, for 2019, the company expects VITAS Healthcare revenue growth of 5.5-6%. Moreover, admissions within the segment are anticipated to improve 3-4%, while Average Daily Census is predicted to rise 4-5%.

Chemed Corporation Price and Consensus

 

Chemed Corporation Price and Consensus | Chemed Corporation Quote

Further, Roto-Rooter sales increased double digits year over year in the last reported quarter. Management expects Roto-Rooter revenues to grow 9-10% in 2019.

Strong cash position: Chemed exited 2018 with total cash and cash equivalents of $4.83 million, reflecting a significant decline from $11.1 million at the end of 2017. The company had total debt of $89.2 million at the end of 2018, which declined from $101.2 million at the end of 2017. During the fourth quarter, the company repurchased shares worth $36.9 million.

At the end of 2018, net cash provided by operating activities was $287.1 million compared with $162.5 million at 2017-end.

Now, Chemed expects adjusted earnings per share of $12.65-$12.85 for 2019.

Among recent developments, the company announced the inauguration of its VITAS Healthcare Inpatient Hospice Unit at Methodist Dallas Medical Center. This launch is expected to boost Chemed’s VITAS segment.This new facility will help terminally ill patients to fight complex diseases.

Which Way Are Estimates Heading?

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at $2.98, indicating growth of 9.6% from the year-ago quarter’s reported figure. The consensus mark for revenues stands at $466.4 million, implying 6.2% improvement from revenues reported in the year-ago quarter.

For 2019, the Zacks Consensus Estimate for earnings is pinned at $12.77, suggesting 7% growth from the year-ago quarter’s reported figure. The same for revenues is pegged at $1.90 billion, indicating a rise of 6.5% from revenues reported in the year-ago quarter.

Bottom Line

Hence, with such solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment. In fact, the company’s long-term earnings growth rate of 8.8% also supports our view.

Other Key Picks

Other top-ranked stocks in the broader medical space are Varian Medical Systems, Inc. VAR, Penumbra, Inc. PEN and Amedisys, Inc AMED. Notably, each of these stocks currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Varian’s long-term earnings growth rate is projected at 8%.

Penumbra’s long-term earnings growth rate is estimated at 20.9%.

Amedisys’s long-term earnings growth rate is projected at 19.7%.

Zacks' Top 10 Stocks for 2019

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Penumbra, Inc. (PEN) : Free Stock Analysis Report
 
Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
 
Amedisys, Inc. (AMED) : Free Stock Analysis Report
 
Chemed Corporation (CHE) : Free Stock Analysis Report
 
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