Chemed (CHE) Up 5.7% Since Last Earnings Report: Can It Continue?

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].