Chemed Corp. (CHE, Financial) posted its first-quarter results on April 19 that beat analysts' estimates. Chemed operates VITAS Healthcare Corp., the largest end-of-life care provider, as well as Roto-Rooter, the largest commercial and residential plumbing company in the nation.
The company reported earnings per share of $2.72 for the first quarter, beating estimates of $2.36.
Revenue came in at $439.2 million, also beating estimates of $419.34 million. Revenue for the first quarter was up by 8.2%, while earnings per share jumped 49.5%.
In the first quarter, VITAS posted revenue of $292 million, up 5.5% compared to the same period last year. The increased revenue is due primarily to Medicare reimbursement rate increases and a reduction in Medicare Cap. Growth was offset by acuity mix shift, impacting revenue growth by 1.8%.
Average patient revenue per day was down 1.2% to $189.76. High acuity care and routine home care averaged $706.24 and $163.53, respectively.
For the first quarter of the year, gross margin, excluding Medicare Cap, was at 21.7%, an improvement of 97 basis points compared to the same period last year.
VITAS posted selling, general and administrative expenses of $20.5 million, down 2.4% compared to the first quarter of 2017. Excluding Medicare Cap, Ebitda came in at $42.9 million in the first quarter, up 11.6%.
Chemed's Roto-Rooter plumbing and drain cleaning business posted sales of $147 million for the first quarter, up $24.7 million from the same period last year. Revenue from water restoration was up $9.6 million, or 53.3%, to $27.7 million compared to the same quarter last year.
Gross margin was at 47.5% in the first quarter, a decline of 69 basis points. Adjusted EBITDA came in at $33.9 million, up 28.7%.
Roto-Rooter offers both residential and commercial sewer repair. The company's CIPP (cured-in-place pipe) lining service offers room for growth, with the market expanding from $40 million to $50 million per year to a multi-billion-dollar market. The repair method is quicker and doesn't require extensive digging, making it an attractive option for homeowners and commercial business owners.
Roto-Rooter operates through company-owned branches as well as franchises and independent contractors. The company operates in both the U.S. and Canada as well as the Philippines, Indonesia and Singapore.
As of March 31, the company had total cash and equivalents of $14 million with debt of $143 million.
Chemed repurchased 300,000 shares for $18.1 million, equating to a cost per share of $270.42. In March, the company's board of directors authorized the purchase of an additional $150 million shares under Chemed's share repurchase program. As of March 31, the company had $124.4 million in remaining share for repurchase authorization under the plan.
The company restarted its share repurchase program in 2007 and has repurchased 13.6 million shares since then. Over this period, Chemed has returned more than $1.2 billion to shareholders.
Chemed reiterated its earnings guidance issued in February and expects to update its guidance after posting its second-quarter results.
Disclosure: The author does not have any stakes in the listed equities.
