Chemed 2025 Q2 Earnings Misses Targets as Net Income Falls 25.9%

Chemed (CHE) reported its fiscal 2025 Q2 earnings on Jul 31st, 2025. Chemed's results fell short of expectations as the company experienced a notable decline in both earnings per share (EPS) and net income. Despite a 3.8% increase in total revenue to $618.80 million, the EPS decreased by 23.4% to $3.60, and net income dropped 25.9% to $52.49 million compared to the previous year. The revised guidance suggests a potential downturn, with expectations for a full-year EPS in the range of $22.00 to $22.30, down from previous forecasts.

Revenue

Chemed's revenue for Q2 2025 saw a 3.8% rise, reaching $618.80 million compared to $595.88 million in Q2 2024. The VITAS segment generated $396.20 million, with routine homecare contributing $358.04 million, general inpatient services at $33.02 million, and continuous care bringing in $23.64 million. Additional revenue sources included Roto-Rooter, which added $222.60 million, and specific services like drain cleaning at $55.56 million, plumbing at $45.28 million, and excavation at $56.49 million. Water restoration contributed $49.82 million, while independent contractors and outside franchisee fees added $17.45 million and $1.41 million, respectively.

Earnings/Net Income

Chemed's EPS declined by 23.4%, dropping to $3.60 in Q2 2025 from $4.70 in Q2 2024, while net income fell to $52.49 million, a 25.9% decrease from the $70.89 million reported in the previous year. This performance highlights a challenging quarter for Chemed, with the EPS reflecting these struggles.

Price Action

The stock price of Chemed has edged down 0.12% during the latest trading day, experiencing a 10.95% drop over the most recent full trading week, and a 15.33% decline month-to-date.

Post-Earnings Price Action Review

The approach of purchasing Chemed stock following an earnings beat and holding it for 30 days resulted in a disappointing -10.04% return, significantly trailing the benchmark return of 85.57%. The strategy's compounded annual growth rate (CAGR) stood at -2.11%, reflecting lackluster performance. Despite a maximum drawdown of 0.00%, the strategy's Sharpe ratio of -0.09 indicates a low-risk profile but points to an underwhelming overall outcome. The results underscore a need for strategic reassessment in terms of capitalizing on earnings announcements. The historical underperformance suggests that relying solely on post-earnings beats as an investment trigger may not be effective for Chemed, given the current market conditions and specific challenges faced by the company.

CEO Commentary

Kevin J. McNamara, CEO of Chemed, noted a 5.8% rise in net patient revenue for VITAS, driven by increased average daily census, while acknowledging the challenges posed by a $19 million Medicare Cap billing limitation in Florida that impacted revenue growth. He expressed cautious optimism about VITAS's future, highlighting new operational strategies in Florida to mitigate cap risks and ongoing investments in Roto-Rooter, despite unexpected weakness in the residential sector. McNamara emphasized the need for strategic adjustments and a focus on addressing operational challenges as the company navigates current market conditions.

Guidance

Chemed forecasts a full-year 2025 revenue increase for VITAS between 7.5% and 8.5%, with an adjusted EBITDA margin of 18.2% to 18.7%. For Roto-Rooter, the company expects a revenue rise of 1.25% to 1.75%, alongside an adjusted EBITDA margin of 23.5% to 24.5%. The earnings per diluted share guidance has been revised to a range of $22.00 to $22.30, down from the previous $24.95 to $25.45, reflecting a cautious outlook in light of evolving market conditions.

Additional News

Chemed Corporation announced a significant leadership change with Nicholas M. Westfall stepping down as CEO of VITAS Healthcare. He will be succeeded by Joel L. Wherley, the current President and COO of VITAS, effective December 1, 2025. This transition marks a notable shift in the company's executive team. Additionally, Chemed was granted a Certificate of Need (CON) by the State of Florida, allowing VITAS to expand its operations into Pinellas County, a region with a lower than average hospice utilization rate. This strategic move is expected to bolster VITAS