When quarterly earnings season hits, we have always been nervous about some company reporting unexpected bad news and maybe sending shock waves through the industry. The one exception is The Ensign Group, which rarely, if ever, has had a negative surprise. They did not disappoint us with their second quarter results.
We have been waiting for Harvard Business School to do a case study on how to run, and grow, a primarily nursing home company at a time when so many providers seem to struggle. We are four and a half years past the beginning of the pandemic, which should not be used as an excuse anymore, but Ensign does not need any excuses.
Everything was up in the second quarter, except for things like staff turnover and agency use. They are not yet at pre-COVID levels on agency use, but getting there. One problem is acquisitions where there has been a staffing problem, so that results in increasing the company’s average agency use until the ED can correct it. And, that is partly what they get paid for.
Same-facilities occupancy increased 2.8% year over year, while transitioning facilities increased by a larger 4.3%. Same-facilities occupancy is now at 80.8%, which is not too shabby for the sector. Some seniors housing companies have yet to reach that level. But in the skilled nursing business, it is not all about occupancy, but what kind of occupancy and revenue source.
Same-facilities skilled services revenue increased by 6.8% year over year, and total skilled services revenue increased by 12.1%. Consolidated GAAP revenue for the second quarter was $1.04 billion, a 12.5% increase over the prior year quarter. All of this positive momentum resulted in Ensign raising its 2024 full-year earnings guidance by about seven cents a share at the low-end, and narrowing the range of the guidance.
Ensign also acquired the operations of four facilities and its REIT partner, Standard Bearer, acquired the real estate of six additional facilities, which are now operated by an Ensign affiliate. All of this resulted in Ensign’s share price jumping up nearly 5% to a new 52-week high on a day when the overall markets were up just 1% to 2%. You just couldn’t write a better script.
