Chemed Corporation (NYSE:CHE)
Chemed Corporation (NYSE:CHE) benefits from the Roto-Rooter division’s ongoing success. Zack’s Consensus Estimate for earnings was lower than the company in the second quarter of 2022. Rising interest in assisted living facilities is cause for optimism. A strong financial footing is also encouraging. Nonetheless, the VITAS division’s declining revenues and the disruptions brought on by the recent global epidemic are not encouraging signs.
While its industry fell by 36.6% and the S&P 500 fell by 13.9% over the past year, shares of this Zacks Rank #3 (Hold) company increased by 0.1%.
With a market worth of $7.1 billion, this hospice care company is among the most well-known in the world. On average, in the most recent four quarters, its earnings have been 6.3% higher than expected.
The company’s earnings increased by 24.5% over the previous five years, more than the 13.2% growth seen by the industry and the 13.4% growth shown by the S&P 500 over the same period. The company predicts a growth rate of 7.8 percent over the next five years, whereas the industry average is 11.5 percent and the S&P 500 is 11.4 percent.
Let’s look into this in greater detail.
Influencing Factors
The Second Quarter Results Were Impressive
Chemed Corporation’s (NYSE:CHE) second-quarter earnings were above projections. The increase in adjusted earnings per share from the prior year is potentially encouraging. Revenue growth was fueled by solid results in the Roto-Rooter division. The number of patients admitted to a nursing home by Chemed increased by 5.3% in the second quarter. Year over year, admissions to assisted living facilities and home-based pre-admit admissions rose by 5.6% and 0.2%, respectively. Positives are augmented by rising gross and operating margins.
Rapid Growth at Roto-Rooter:
The Roto-Rooter division of Chemed Corporation (NYSE:CHE) business posted 6% year-over-year revenue growth in the second quarter, which is encouraging. The company’s plumbing, drain cleaning, and water restoration services saw consistent demand in the period under review. The commercial revenue earned by all Roto-Rooter franchises increased by 7.5%. In terms of residential revenue, Roto-Rooter franchises as a whole increased by 5% from the previous year.
Chemed Corporation (NYSE:CHE) management is confident that Roto-Rooter will continue to gain market share because of the company’s numerous competitive advantages. These advantages include its well-known brand, rapid response time, and availability via contact centers and the Internet around the clock.
Solid Financial Stability:
Chemed Corporation (NYSE:CHE) had $9.6 million in cash and equivalents at the end of the second quarter of 2022. Compared to available funds, long-term debt at the end of the second quarter of 2022 totaled $111.8 million. At the end of the quarter, the company reported $5 million in accounts payable. Despite the economic slump, Chemed is solvent enough to fulfill its short-term debts.
Downsides
Disheartening VITAS Findings:
In the second quarter, year-over-year growth in VITAS sales for Chemed Corporation (NYSE:CHE) was -4.5 percent. Concerns associated with the pandemic continued to pose difficulties for the industry, such as a lack of available medical personnel, an upheaval in the senior housing market, and an increase in hospice referrals. The number of patients admitted to VITAS fell 12.5% from a year ago.
Disadvantages Caused by Pandemic:
Reductions in VITAS nursing home admissions have followed the pandemic’s effects on the occupancy of senior housing facilities. Nursing home residents were responsible for 16.4% of VITAS’ patient population in the second quarter, down from 18% of the total census just before the pandemic. In addition, the Roto-Rooter division still faces difficulties in staffing due to the epidemic.
Competition is fierce:
Numerous local and regional businesses offer services in the plumbing repair and maintenance industry, including sewer, drain, and pipe cleaning. Because there is a wide variety of hospice care providers, VITAS must differentiate itself from the crowd by providing prompt, professional service.
Calculate the Trend
According to the Zacks Consensus Estimate, Chemed Corporation’s (NYSE:CHE) earnings in 2022 will be $19.48, up 0.8% from 2021.
Revenues in 2022 are expected to reach $2.15 billion, according to the Zacks Consensus Estimate, up 0.4% from the previous year’s reported figure.
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Author Shariq Khan 