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Why Is Chemed (CHE) Up 4.7% Since Last Earnings Report?

·4 min read

It has been about a month since the last earnings report for Chemed (CHE). Shares have added about 4.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Chemed 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 drivers.

Chemed Q1 Earnings Beat Estimates, Gross Margin Up

Chemed reported first-quarter 2021 adjusted earnings per share of $4.44, up 20.7% year over year. The figure surpassed the Zacks Consensus Estimate by 5.7%.

The company’s GAAP earnings per share was $4.01, highlighting an 18.6% improvement year over year.

Revenues in Detail

Revenues in the reported quarter improved 2.2% year over year to $527.4 million. The metric surpassed the Zacks Consensus Estimate by 2%.

Segmental Details   

In the first quarter, net revenues at VITAS totaled $316 million, down 6.5% year over year. This revenue decline was primarily led by a 7.1% decline in days-of-care, a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 2.8% and an acuity mix shift that reduced the blended average Medicare rate by approximately 50 basis points (bps).

Roto-Rooter reported sales of $212 million in the first quarter, up 18.9% year over year.

Total Roto-Rooter branch commercial revenues declined 8.4% on a 5.8% fall in drain cleaning revenues, 5% decline in commercial plumbing, 19.5% decrease in excavation revenues and an 8.8% increase in commercial water restoration revenues.

Total Roto-Rooter branch residential revenues registered growth of 32% on a 29.5% rise in residential drain cleaning revenues, 34.9% improvement in plumbing, 35.8% increase in excavation and 28.7% growth in residential water restoration.

Margin in Detail

Gross profit rose 13.9% year over year to $186.9 million in the first quarter of 2021. Gross margin expanded 363 bps year over year to 35.4%, while the cost of products and services declined 3.2% in the first quarter of 2021.

Adjusted operating profit increased 1.9% from the year-ago period to $95.3 million. Adjusted operating margin contracted 5 bps to 18.1% with a 29.8% rise in adjusted operating expenses.

Liquidity & Capital Structure

Chemed exited the first quarter of 2021 with cash and cash equivalents of $210 million, marking an improvement from $162.7 million at the end of the last reported quarter. Similar to fourth-quarter 2020, there was no long-term debt at the end of first-quarter 2021.

First-quarter net cash provided by operating activities was $106.7 million compared with $89.3 million a year ago.

In the first quarter, Chemed’s management repurchased stocks for $44.8 million. As of Mar 31, 2021, there was approximately $134 million of share repurchase remaining under the existing plan.

Guidance 2021

Management is likely to provide the updated 2021 earnings guidance in July along with the second-quarter earnings release.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Chemed 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 this revision looks promising. Notably, Chemed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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