Chemed Corporation (NYSE:CHE) has been gaining investor confidence on continued positive results. Over the past year, the company’s share price has outperformed its industry. The stock has gained 27.4% in comparison with the industry’s 1% gain and the S&P 500’s 2.3% growth.
This Cincinnati, OH-based company has a market cap of $4.85 billion. The company has an expected earnings growth rate of 10% for the next three to five years.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
What Makes the Stock an Attractive Pick?
VITAS Prospects Bright
Over the recent past, Chemed’s VITAS business was in trouble due to certain admission coding changes initiated by the Centers for Medicare & Medicaid Services (CMS). However, management noted that, the recent admission trend has been positive which should continue in the coming quarters. During third-quarter 2018, VITAS admissions increased 2.5%. Overall, VITAS revenues rose 6.5% on the back of a 0.8% rise in geographically weighted average Medicare reimbursement rate and a 7.8% increase in average daily census.
Roto-Rooter Continues to Expand
During third-quarter 2018, Roto-Rooter reported 12.1% growth year over year. This business displayed robust performance in the core plumbing and drain cleaning service segments as well as solid growth in water restoration. We are currently looking forward to Roto Rooter’s recently-made acquisition of certain franchises in California. According to the company, it has acquired five formerly independent Roto-Rooter franchises covering several areas of Northern California.
Shareholders’ Returns
Chemed’s capital deployment policy is based on suitable acquisitions and solid return of cash to shareholders through dividends and buybacks. Chemed exited the third quarter of 2018 with total cash and cash equivalents of $67.5 million, a significant rise from $12.7 million at the end of the second quarter of 2018.
During the third quarter, the company repurchased shares worth $37.7 million. The board has authorized an additional $150 million for stock buyback under Chemed’s existing plan. As of Sep 30, 2018, the company had $84 million of remaining share repurchase authorization under this plan.
Which Way Are Estimates Treading?
For the current quarter, the Zacks Consensus Estimate for earnings is pegged at $3.27, reflecting year-over-year growth of 41%. The same for revenues stands at $459.7 million, mirroring 7.3% improvement year over year.
For 2018, the Zacks Consensus Estimate for earnings is pinned at $11.9, reflecting 40.6% year-over-year growth. The same for revenues is pegged at $1.79 billion, indicating a rise of 7.2%.
Other Key Picks
A few other top-ranked stocks in the broader medical space are Integer Holdings Corporation (NYSE:ITGR) , Surmodics, Inc. (NASDAQ:SRDX) and Veeva Systems (NYSE:VEEV) .
Veeva Systems’ long-term earnings growth rate is estimated at 19.2%. The stock carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Integer Holdings has an earnings growth rate of 31.2% for the next quarter and a Zacks Rank #2.
Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank of 2.
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Veeva Systems Inc. (VEEV): Free Stock Analysis Report
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Chemed Corporation (CHE): Free Stock Analysis Report
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