Chemed’s second quarter saw a negative market reaction, driven by operating shortfalls in both core businesses. Management highlighted that VITAS, its hospice division, faced ongoing headwinds from Medicare cap limitations in Florida, while Roto-Rooter’s residential revenue was impacted by a sudden drop in consumer demand. CEO Kevin McNamara acknowledged that “performance of both operating units did not meet our expectations,” citing disruption from patient mix adjustments at VITAS and a challenging April and May for Roto-Rooter. The focus for the quarter was on mitigating the Medicare cap issue and addressing inefficiencies in workforce deployment, with management emphasizing that these were unusual conditions unlikely to persist.
Is now the time to buy CHE? Find out in our full research report (it’s free).
Chemed (CHE) Q2 CY2025 Highlights:
- Revenue: $618.8 million vs analyst estimates of $617.1 million (3.8% year-on-year growth, in line)
- Adjusted EPS: $4.27 vs analyst expectations of $4.98 (14.3% miss)
- Adjusted EBITDA: $95.33 million vs analyst estimates of $107.8 million (15.4% margin, 11.6% miss)
- Operating Margin: 11%, down from 14.8% in the same quarter last year
- : 1.66 million, up 111,292 year on year
- Market Capitalization: $6.43 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Chemed’s Q2 Earnings Call
- Brian Gil Tanquilut (Jefferies) asked how Chemed will prevent Medicare cap issues from recurring in Florida. CFO Michael Witzeman explained that focusing on short-stay hospital admissions and moderating the long-stay patient bubble should resolve the issue, with margins likely below 2024 but stabilizing in 2026.
- Benjamin Hendrix (RBC Capital Markets) questioned the assumptions behind Florida’s reimbursement rates and the company’s readiness for another rate differential. CEO Kevin McNamara said Chemed would reserve any gains above the national average and proactively manage admissions to avoid repeating this year’s cap problem.
- Hendrix (RBC Capital Markets) also inquired about Roto-Rooter’s field management stability. Witzeman responded that prior private equity poaching had subsided, and current underperformance was more due to lower call volume and digital competition than management turnover.
- Joanna Sylvia Gajuk (Bank of America) probed the sustainability of higher insurance costs at Roto-Rooter. McNamara clarified that while the recent spike included some “catch-up” expense, ongoing safety and claims management initiatives should reduce costs over time, but guidance assumes elevated expense for now.
- Gajuk (Bank of America) asked about Chemed’s acquisition strategy for VITAS. McNamara emphasized no change in approach—Chemed is pursuing deals at the right valuation and location and can fund both acquisitions and share buybacks given the strong balance sheet.
Catalysts in Upcoming Quarters
Looking forward, our analysts will focus on (1) VITAS’ progress in rebalancing its patient mix and reducing Medicare cap exposure in Florida, (2) whether Roto-Rooter’s digital marketing investments can restore call volume and improve residential revenue trends, and (3) the impact of expense management initiatives on operating margins. Updates on new CON locations and any hospice acquisitions will also be closely watched.
Chemed currently trades at $443.45, down from $466.55 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
The Best Stocks for High-Quality Investors
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
