Why Is Ensign Group (ENSG) Up 13.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Ensign Group (ENSG). Shares have added about 13.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Ensign Group Q3 Earnings Beat on Occupancy
Ensign Group reported a third-quarter 2023 adjusted EPS of $1.20, which surpassed the Zacks Consensus Estimate by 1.7%. The bottom line improved 15.4% year over year.
Operating revenues climbed 22.2% year over year to $940.8 million in the quarter under review. The top line beat the consensus mark by a whisker.
The quarterly results benefited on the back of higher managed care revenues and improved occupancies. However, the upside was partly offset by an elevated expense level.
Q3 Update
ENSG’s adjusted net income of $69 million advanced 16.6% year over year in the third quarter and came higher than our estimate of $67.8 million. Same-store occupancy improved 290 basis points (bps) year over year while transitioning occupancy expanded 270 bps year over year.
Total expenses rose 23.8% year over year to $861 million, higher than our estimate of $854.9 million. The year-over-year increase was due to higher cost of services, rent-cost of services and general and administrative expenses.
Segmental Update
Skilled Services: The segment recorded revenues of $903 million, which grew 22.1% year over year in the third quarter. The figure matched the Zacks Consensus Estimate but surpassed our estimate of $902.3 million. Segment income improved 15.8% year over year to $117.8 million.
Skilled nursing and campus operations of the segment totaled 258 and 26, respectively, at the third-quarter end.
Standard Bearer: Rental revenues advanced 12% year over year to $21 million in the quarter under review but fell short of our estimate of $22.2 million. Segmental income of $7.2 million grew 3.2% year over year.
Funds from Operations totaled $13.6 million in the third quarter, which rose 8.7% year over year.
Financial Update (as of Sep 30, 2023)
Ensign Group exited the third quarter with cash and cash equivalents of $467.9 million, which climbed 47.9% from the level at 2022 end. It had a leftover capacity of $593.3 million under its line of credit at the third-quarter end.
Total assets of $4,082 million increased 18.2% from the 2022-end figure.
Long-term debt-less current maturities were $146.5 million, down 1.9% from the figure as of Dec 31, 2022. Current maturities of long-term debt amounted to $3.9 million.
Total equity of $1,465.4 million advanced 17.3% from the figure at 2022 end.
ENSG generated net cash from operations of $291.4 million in the first nine months of 2023, which rose 31.1% from the prior-year comparable period.
Capital-Deployment Update
Ensign Group did not buy back shares in the third quarter. It paid out a quarterly dividend of 5.75 cents per share.
2023 Outlook Updated
Revenues are projected to lie within $3.72-$3.73 billion compared with the prior guidance of $3.69-$3.73 billion. The midpoint of the updated outlook implies a 23.1% rise from the 2022 figure.
Adjusted EPS is estimated to be between $4.73-$4.79 for 2023, up from the earlier view of $4.70-$4.78. The midpoint of the revised guidance indicates an improvement of 15% from the 2022 figure.
The weighted average common shares outstanding is estimated to be around 57.7 million and the tax rate is assumed at 25% for this year.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, Ensign Group has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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
Ensign Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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