Core Insights - Chemed Corporation reported third-quarter 2024 adjusted earnings per share (EPS) of $5.64, a 6% increase year over year, but missed the Zacks Consensus Estimate by 2.1% [1] - The company's GAAP EPS was $5.00, reflecting a 1.4% increase from the previous year [1] - Revenues for the quarter improved by 7.4% year over year to $606.2 million, but also missed the Zacks Consensus Estimate by 1.1% [2] Revenue Breakdown - VITAS segment net revenues reached $391.4 million, up 17.3% year over year, driven by a 15.5% increase in days of care and a nearly 2.6% rise in the Medicare reimbursement rate [4] - Roto-Rooter segment reported sales of $214.8 million, down 6.9% year over year, with declines in various service categories [4][5] Margin Analysis - Gross profit increased by 3.9% year over year to $210 million, but gross margin contracted by 117 basis points to 34.6% due to a 9.3% rise in service costs [6] - SG&A expenses rose by 2.4% year over year to $102 million, while adjusted operating profit increased by 22.7% to $108 million, with adjusted operating margin contracting by 35 basis points to 17.8% [6] Liquidity and Capital Structure - Chemed ended the quarter with cash and cash equivalents of $238.5 million, up from $222.9 million at the end of the previous quarter, and had no current or long-term debt [7] - Cumulative net cash from operating activities was $252.6 million, compared to $221.7 million in the prior year [7] Share Repurchase and Dividends - The company repurchased 100,000 shares for $57.8 million, averaging $578.2 per share, with approximately $168.1 million remaining under its share repurchase authorization [8] - Chemed has a consistent dividend-paying history, with a five-year annualized dividend growth of 5.51% [8] Guidance and Outlook - Chemed maintained its 2024 revenue guidance for VITAS, expecting a revenue increase of 16.3-17.3% compared to the previous year [9] - The updated adjusted EPS outlook for 2024 is now in the range of $23.00-$23.15, down from the previous estimate of $23.55-$23.80, with the Zacks Consensus Estimate at $23.58, indicating a 16.2% growth over 2023 [10]

Core Viewpoint - Chemed reported quarterly earnings of $5.64 per share, missing the Zacks Consensus Estimate of $5.76 per share, but showing an increase from $5.32 per share a year ago [1][2] Financial Performance - The company posted revenues of $606.18 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.12%, compared to $564.53 million in the same quarter last year [3] - Chemed has surpassed consensus revenue estimates just once over the last four quarters [3] Stock Performance - Chemed shares have increased approximately 4.1% since the beginning of the year, while the S&P 500 has gained 22.1% [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $7.05 on revenues of $641.75 million, and for the current fiscal year, it is $23.58 on revenues of $2.44 billion [8] - The trend of estimate revisions for Chemed is mixed, which could change following the recent earnings report [7] Industry Context - The Medical - Outpatient and Home Healthcare industry is currently in the top 9% of over 250 Zacks industries, indicating a favorable outlook [9] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that industry performance can significantly impact stock performance [6][9]

Revenue Performance - Revenue for the third quarter of 2024 increased by 7.4% to $606.2 million compared to the prior-year period[4] - Service revenues for Q3 2024 reached $606.2 million, a 7.4% increase from $564.5 million in Q3 2023[28] - The company reported a total of $1.79 billion in service revenues for the nine months ended September 30, 2024, compared to $1.68 billion for the same period in 2023, reflecting a 6.5% increase[28] - Total net revenue for the nine months ended September 30, 2024, was $1,119,970,000, compared to $965,066,000 for the same period in 2023, reflecting a 16.0% increase[40] Earnings and Profitability - Adjusted diluted EPS rose by 6.0% to $5.64, while GAAP diluted EPS increased by 1.4% to $5.00[4] - Net income for Q3 2024 was $75.8 million, compared to $75.0 million in Q3 2023, reflecting a 1.1% increase[28] - Earnings per share for Q3 2024 were $5.04, up from $4.97 in Q3 2023, representing a 1.4% increase[28] - The company reported a net income of $211,680 for the nine months ended September 2024, compared to $182,456 for the same period in 2023, representing a 16.0% increase[38] Segment Performance - VITAS segment net patient revenue reached $391.4 million, marking a 17.3% increase, with average daily census up by 15.5%[4] - Roto-Rooter segment revenue decreased by 6.9% to $214.8 million, with net income down by 18.9% to $39.8 million[5] - Total revenue for VITAS in Q3 2024 was $70,887, while Roto-Rooter reported $56,382, showing a significant performance difference between the two segments[36] Cash and Assets - As of September 30, 2024, Chemed had total cash and cash equivalents of $238.5 million and no debt[16] - Cash and cash equivalents increased to $238.5 million in Q3 2024, up from $173.2 million in Q3 2023[31] - Total assets as of September 30, 2024, amounted to $1.77 billion, an increase from $1.56 billion as of September 30, 2023[31] Shareholder Returns - The company repurchased 100,000 shares for $57.8 million, with approximately $168.1 million remaining under its share repurchase authorization[18] - Full-year 2024 earnings per diluted share guidance is estimated to be in the range of $23.00 to $23.15, representing a 13.3% to 14.0% increase from 2023[19] Expenses and Costs - Selling, general and administrative expenses for Q3 2024 totaled $102.0 million, a 1.4% increase from $99.6 million in Q3 2023[29] - The cost of services provided and goods sold for the three months ended September 30, 2024, was $362,358,000, up from $230,804,000 in 2023, reflecting a significant increase of 57%[33] - Total costs and expenses for the nine months ended September 30, 2024, were $1,538,679,000, compared to $1,449,330,000 in 2023, indicating a rise of 6.2%[35] Cash Flow - Cash provided by operating activities for the nine months ended September 30, 2024, was $252,584,000, compared to $221,736,000 in 2023, an increase of 13.9%[32] - Net cash used by investing activities for the nine months ended September 30, 2024, was $131,391,000, significantly higher than $48,972,000 in 2023[32] - Net cash used by financing activities for the nine months ended September 30, 2024, was $146,700,000, compared to $73,740,000 in 2023, indicating an increase of 98.7%[32] Operational Metrics - Average revenue per patient per day for VITAS was $199.16, an increase of 139 basis points year-over-year[8] - Days of care in homecare increased to 1,622,680 in Q3 2024 from 1,391,377 in Q3 2023, representing a 16.6% growth[40] - Average daily census in homecare rose to 17,639 days in Q3 2024, compared to 15,124 days in Q3 2023, indicating a 16.6% increase[40] - Total admissions for the nine months ended September 30, 2024, were 51,020, an increase from 47,564 in the same period of 2023, marking a 5.2% rise[40] Tax and Interest - Income taxes for Chemed Corporation in Q3 2024 amounted to $67,662, compared to $37,778 in Q3 2023, showing a significant increase of 79.2%[37] - Interest expense for Chemed Corporation in Q3 2024 was $1,281, compared to $2,766 in Q3 2023, indicating a decrease of 53.7%[37] Strategic Investments - Covenant Health acquisition contributed approximately $10 million to $11 million in revenue for VITAS in Q3 2024[6] - The company incurred acquisition expenses of $386 in Q3 2024, while the nine-month total was $1,339, reflecting ongoing strategic investments[38] Miscellaneous - Estimated uncollectible accounts as a percent of revenues were 0.6% for Q3 2024, down from 1.3% in Q3 2023[41] - Days of revenue outstanding, including unapplied Medicare payments, was 37.5 days for Q3 2024, compared to 36.4 days in Q3 2023[41] - Significant credits/charges included stock option expenses of $(6,038,000) and long-term incentive compensation of $(3,083,000) for Q3 2024[42]

Core Viewpoint - Chemed Corporation (CHE) is anticipated to experience growth in the upcoming quarters, primarily driven by the VITAS business, while facing challenges from a sluggish macroeconomic environment and competitive disadvantages [1][7]. Group 1: Company Performance - Chemed's stock has increased by 11.7% over the past year, underperforming compared to the industry's growth of 33.9% and the S&P 500's increase of 32.3% [2]. - The company has a market capitalization of $8.72 billion and an estimated earnings growth rate of 16.2% for 2024, which is higher than the S&P 500's growth rate of 15.7% [2]. - In the trailing four quarters, Chemed delivered an average earnings surprise of 1.88% [2]. Group 2: Key Upsides - The VITAS segment has shown significant improvement, with a robust start to the second quarter following the acquisition of Covenant Health and Community Services, leading to an 11% increase in admissions and a 14.4% rise in Average Daily Census (ADC) [3][4]. - VITAS' net revenues increased by 16.7% year over year, supported by a 2.5% rise in the average Medicare reimbursement rate and a 14.4% increase in days of care [4]. - The net bedside headcount for VITAS increased by 234 licensed professionals, indicating a strong operational outlook [4]. - The Roto-Rooter brand has demonstrated resilience, maintaining strong close rates at the call center and during technician dispatch [5]. - The commercial plumbing business has seen unprecedented high demand post-pandemic, with initiatives to enhance sales staff and customer relationship management expected to positively impact performance [6]. Group 3: Key Downsides - Chemed faces macroeconomic headwinds, including rising staffing and labor costs, inflationary trends, and increased logistics costs, which have negatively impacted performance [7]. - In the second quarter, the cost of services provided and goods sold rose by 4.2% year over year, while selling, general, and administrative expenses increased by 7.7% [7]. - The competitive landscape for both Roto-Rooter and VITAS is challenging, with a need for innovation and effective market response to maintain operational success [8]. Group 4: Financial Estimates - The Zacks Consensus Estimate for Chemed's 2024 earnings per share (EPS) is $23.58, remaining constant over the past 30 days [9]. - The estimated revenues for 2024 are projected at $2.44 billion, indicating a 7.75% increase from the previous year [9].

Core Viewpoint - Chemed Corporation's recent earnings report showed mixed results, with adjusted earnings per share increasing significantly year over year but missing consensus estimates. The company is experiencing a positive trend in its stock performance, outperforming the S&P 500, but there are concerns about future revenue growth, particularly in its Roto-Rooter segment [1][2][11]. Financial Performance - Adjusted earnings per share for Q2 2024 were $5.47, a 34.1% increase year over year, but missed the Zacks Consensus Estimate by 1.3% [2]. - GAAP earnings per share rose to $4.65, reflecting a 32.5% increase from the previous year [2]. - Revenues for the quarter reached $595.9 million, up 7.6% year over year, but also fell short of the Zacks Consensus Estimate by 1.2% [3]. Segment Analysis - **VITAS**: Generated net revenues of $374.6 million, a 16.7% increase year over year, driven by a 14.4% rise in days of care and a nearly 2.5% increase in Medicare reimbursement rates. The segment also completed an acquisition for $85 million [5]. - **Roto-Rooter**: Reported sales of $221.3 million, down 5% year over year, with significant declines in various service categories, including an 8.2% drop in commercial revenues and a 1.6% decrease in residential revenues [6][7]. Margins and Profitability - Gross profit increased by 14.8% year over year to $206.1 million, with gross margin expanding by 216 basis points to 34.6% despite rising costs [8]. - Adjusted operating profit rose 22.7% to $103.9 million, with adjusted operating margin expanding by 215 basis points to 17.4% [8]. Liquidity and Capital Structure - At the end of Q2 2024, Chemed had cash and cash equivalents of $222.9 million, down from $313.4 million at the end of Q1 2024. The company had no long-term debt [9]. - The cumulative net cash from operating activities was $162.1 million, compared to $192.8 million in the same period last year [9]. Shareholder Returns - During the quarter, Chemed repurchased 100,000 shares for $55.8 million, averaging $557.68 per share. Approximately $225.9 million remains under its share repurchase authorization [10]. - The company has a consistent dividend-paying history, with a five-year annualized dividend growth rate of 5.51% [10]. 2024 Guidance - Chemed anticipates VITAS revenues to increase by 16.3%-17.3% in 2024, while Roto-Rooter revenues are expected to decline by 4% [11]. - The Zacks Consensus Estimate for total revenues in 2024 is $2.44 billion, indicating an 8% improvement [11]. - Adjusted earnings per share for 2024 are estimated to be in the range of $23.55-$23.80, reflecting a 14.3% growth over the previous year [12]. Market Position - Chemed is part of the Zacks Medical - Outpatient and Home Healthcare industry, which has shown positive performance trends, with competitors like Quest Diagnostics also reporting growth [16].

Core Viewpoint - Chemed Corporation (NYSE:CHE) continues to be a strong investment opportunity, with a reiterated buy rating following its Q2 FY'24 earnings report, projecting a price target of $580-$600 per share in the near term and $700 per share in the long term [4][19]. Financial Performance - In Q2 FY'24, Chemed reported approximately $596 million in revenue, reflecting a year-over-year growth of about 7.6% and earnings of $5.47 per share [6]. - The company's return on invested capital (ROIC) stands at approximately 22%, with book capital valued at around $1.9 billion [5][6]. - VITAS, a key segment, reported 17,344 admissions, an 11% increase year-over-year, contributing $374 million in sales, which is a 17% increase from the previous year [6][7]. Growth Projections - Management has revised its guidance upward, forecasting VITAS growth between 16.3% to 17.3%, with average daily census (ADC) growth projected at 13.3% to 14.4% [6]. - The acquisition of Covenant Health is expected to contribute approximately $30 million in sales for FY24, with an adjusted EBITDA of around $8.5 million [7]. Valuation Insights - The current valuation of Chemed is approximately 6x enterprise value to invested capital (EV/IC), which is considered compressed but leaves room for expansion [9][12]. - The company has the potential to reinvest about 11% of its net operating profit after tax (NOPAT) annually, which could lead to a share price of approximately $603 by FY'26E at a 6.3x EV/IC multiple [12][14]. Management and Strategy - Chemed's management is recognized for its shareholder-friendly practices, treating capital as shareholders' cash and deploying it wisely [8][19]. - The company has demonstrated strong unit economics across its operating businesses, indicating effective capital stewardship [8][19].

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Core Viewpoint - The long-term health care crisis in the U.S. is significant, with Americans spending $245 billion on long-term care, indicating a growing investment opportunity in long-term care stocks [1][2]. Group 1: Long-Term Care Industry Overview - The long-term care sector includes businesses providing care in homes and nursing facilities, with strong operators managing to be profitable despite low margins [1]. - The aging population is expected to be a major theme impacting the health care sector and REITs over the next decade [5]. Group 2: Company Profiles Welltower (WELL) - Welltower is a real estate investment trust (REIT) focused on providing capital to senior housing operators and health systems, generating 85% of its net operating income (NOI) from the U.S. [3][4]. - In 2023, seniors housing accounted for 42% of its NOI, with a projected occupancy rate increase of 290 basis points for 2024 [4][6]. - The company reported a 21.7% growth in same-store NOI for seniors housing in Q2 2023 and has engaged in $4.9 billion in acquisitions and loan funding since the start of 2024 [6]. Chemed (CHE) - Chemed has a market capitalization of $8.69 billion and derives 60% of its revenue from Vitas, a leading hospice care provider, and 40% from Roto-Rooter [7][8]. - The company reported $596 million in revenue for Q2 2023, with a 34.1% increase in adjusted earnings per share [8]. - Vitas' EBITDA was 17.8%, significantly higher than the previous year, while Roto-Rooter's EBITDA remained strong at 27.0% [9]. The Pennant Group (PNTG) - The Pennant Group, with a market cap of $861 million, has seen its shares rise by 101% in 2024 [10]. - The company operates a decentralized model for home health and hospice care, managing 53 senior living communities across 13 states [10][11]. - It has achieved a compounded annual revenue growth of 22% over the past decade and is positioned to benefit from industry consolidation due to the aging population [11][12].

The research service features daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, all of which will help you become a smarter, more confident investor. The Zacks Style Scores is a unique set of guidelines that rates stocks based on three popular investing types, and were developed as complementary indicators for the Zacks Rank. This combination helps investors choose securities with the highest chances of beating ...

Chemed (CHE) is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank. Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration ...