Why is Ensign Group (ENSG) up 1.7% since its last earnings report?

A month has passed since Ensign Group’s (ENSG) last earnings report. Shares rose about 1.7% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ensign Group headed for a pullback? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the company’s most recent earnings report in order to get a better handle on the important factors influencing the situation.

Ensign Group’s earnings beat the first quarter thanks to higher occupancy

Ensign Group reported first-quarter 2024 adjusted earnings per share (EPS) of $1.30, beating the Zacks Consensus Estimate of $1.29. The financial result increased by 15% year on year.

Operating revenues of $1 billion increased 13.9% year-over-year in the quarter. The upper limit exceeded the consensus by 0.5%.

The quarterly results are driven by higher skilled services revenues, growth in the number of skilled workers and improved occupancy. A decline in operating cash flow and a significant increase in overall costs may have impacted results.

First quarter update

Ensign Group’s adjusted net income increased 16.6% year-over-year to $75.4 million in the first quarter, exceeding our estimate of $74.2 million.

Same-store occupancy increased 210 basis points (bps) year-over-year, while transition occupancy increased 220 basis points year-over-year.

Total expenses of $928 million increased 14.3% year over year in the quarter and were higher than our estimate of $921.4 million. The year-on-year increase is due to higher costs of services, general management costs and rents.

Segment update

Qualified services: Segment revenue increased 13.9% year-over-year to $969.6 million in the first quarter. The data narrowly missed our estimates. This rate was supported by improved occupancy and patient days spent. Segment revenue of $126.8 million increased 11.9% year-over-year.

At the end of the first quarter, the number of skilled nursing facilities and campuses in this segment was 264 and 27, respectively.

Standard bearer: Rental revenue was $22.2 million, up 12.6% year over year and exceeding our estimate of $21.7 million. This indicator was supported by increasing acquisitions. Segment revenue of $7.3 million increased 0.5% year-over-year.

Funds from operations amounted to $14.1 million in the first quarter, up 6.8% year-over-year.

Financial update (as of March 31, 2024)

Ensign Group ended the first quarter with cash and cash equivalents of $511.8 million, an increase of 0.4% compared to the value at the end of 2023. At the end of the first quarter, the company had a remaining creditworthiness of 593.7 million dollars.

Total assets of $4.3 billion increased 3.1% from the end-2023 level.

Non-debt long-term debt maturities were $144.5 million, a 0.7% decrease from December 31, 2023. Current long-term debt maturities were $4 million.

Total equity of $1.6 billion increased by almost 5.8% compared to the end-2023 value.

In the first quarter of 2024, ENSG generated net cash from operations of $35.3 million, down 27% year-over-year.

The story continues

Capital deployment update

Ensign Group did not repurchase shares in the first quarter. Management paid $3.4 million in dividends this quarter.

Forecast for 2024 confirmed

Revenue is expected to be between $4.13 billion and $4.17 billion, with the halfway mark representing an 11.3% improvement from the 2023 figure of $3.73 billion.

Adjusted EPS is projected to be $5.29 to $5.47 in 2024, with the midpoint suggesting a 13% increase from the 2023 figure of $4.77.

The weighted average common stock outstanding is estimated to be approximately 58.5 million and the 2024 tax rate is 25%.

How have estimates changed since then?

It turns out that the estimates have not changed in the last month.

VGM results

Currently, Ensign Group has a solid growth score of B, although it lags in the Momentum Score with an F. However, the stock is rated a B for value, ranking in the top 40% for value for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

The Ensign Group carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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