Ensign Group Q2 Earnings Beat on Occupancy, Stock Up 7.2%

Shares of The Ensign Group, Inc. ENSG gained 7.2% since it reported second-quarter 2024 results on Jul 25, 2024. Strong quarterly results benefited from improved occupancy, skilled mix days, and higher skilled service revenues. However, declining cash flow from operations and a rise in overall expenses acted as a partial offset.

ENSG reported a second-quarter 2024 adjusted earnings per share of $1.32, which beat the Zacks Consensus Estimate by 2.3%. The bottom line increased 13.8% year over year.

Operating revenues of $1.04 billion improved 12.5% year over year in the quarter under review. The top line outpaced the consensus mark by 2%.

Q2 Update

Ensign Group's adjusted net income grew 15.3% year over year to $76.4 million in the second quarter and beat our estimate of $75.2 million.

Same-store occupancy improved 280 basis points (bps) year over year while transitioning occupancy expanded 430 bps year over year.

Total expenses of $950.3 million escalated 12.7 % year over year in the quarter under review and came higher than our estimate of $932.7 million. The year-over-year increase was due to higher costs of services, general and administrative expenses, and rent.

Segmental Update

Skilled Services: The segment's revenues rose 12.1% year over year to $991.3 million in the second quarter. The metric beat our estimate of $983 million. The metric was supported by improved occupancy and improved patient days. Segment income of $122.2 million improved 4.4% year over year.

Skilled nursing and campus operations of the segment totaled 272 and 29, respectively, at the second-quarter end.

Standard Bearer: Rental revenues amounted to $23.4 million, which grew 17.3% year over year and outpaced our estimate of $22.8 million. The metric was supported by rising acquisitions. Segmental income of $7.4 million rose 3.2% year over year.

Funds from Operations were $14.5 million in the second quarter, which improved 9.5% year over year.

Financial Update (as of Jun 30, 2024)

Ensign Group exited the second quarter with cash and cash equivalents of $477.3 million, which declined 6.3% from the 2023-end figure. It had a leftover capacity of $573.1 million under its line of credit at the second-quarter end.

Total assets of $4.4 billion rose 6.2% from the 2023-end level.

Long-term debt-less current maturities were $143.6 million, which declined 1.3% from the figure as of Dec 31, 2023. Current maturities of long-term debt amounted to $4 million.

Total equity of $1.7 billion climbed nearly 11.1% from the 2023-end figure.

ENSG generated net cash from operations of $112.2 million in the first half of 2024, which plunged 33.2% from the year-ago figure.

Capital-Deployment Update

Ensign Group did not buy back shares in the first half. During the first half of 2024, management paid dividends worth $6.8 million.

2024 Outlook Raised

Revenues are anticipated to lie within $4.20-$4.22 billion, the mid-point of which indicates an improvement of 12.9% from the 2023 figure of $3.73 billion.

Adjusted EPS is forecasted to be between $5.38 and $5.50 for 2024, the midpoint of which suggests more than 14% growth from the 2023 figure of $4.77.

The weighted average common shares outstanding is estimated to be around 58.5 million, and the tax rate is assumed to be 25% for 2024.

Zacks Rank

Ensign Group currently carries a Zacks Rank #4 (Sell).

Other Medical Sector Releases

Of the Medical sector players that have reported second-quarter 2024 results so far, the bottom-line results of UnitedHealth Group Incorporated UNH, Elevance Health, Inc. ELV, and HCA Healthcare, Inc. HCA beat the Zacks Consensus Estimate.

UnitedHealth Group reported a second-quarter 2024 adjusted EPS of $6.80, which beat the Zacks Consensus Estimate by 2.3%. The bottom line rose 10.7% year over year. Revenues amounted to $98.9 billion, which improved 6.4% year over year in the quarter under review on the back of strong performance in its UnitedHealthcare and Optum business lines. The top line outpaced the consensus mark of $98.7 billion.

Elevance Health reported second-quarter 2024 adjusted EPS of $10.12 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 12% year over year. Operating revenues of $43.2 billion dipped 0.4% year over year. However, the top line beat the consensus mark by 0.5%.

HCA Healthcare reported a second-quarter 2024 adjusted EPS of $5.50, which beat the Zacks Consensus Estimate by 10.7%. The bottom line improved 28.2% year over year. Revenues amounted to $17.5 billion, which improved 10.3% year over year in the quarter under review. The top line outpaced the consensus mark by 2.2%.

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