Chemed 2025 Q2 Earnings Net Income Drops 25.9%

Chemed (CHE) reported its fiscal 2025 Q2 earnings on Jul 29th, 2025. The company's performance missed expectations as its net income experienced a significant decline, reflecting the challenges faced in its operations. The guidance was adjusted downward, indicating a cautious outlook for the remainder of the year. The decline in net income was primarily attributed to the impact of Medicare Cap billing limitations in Florida, which affected revenue growth. Despite these setbacks, Chemed remains committed to addressing these challenges through strategic operational adjustments in its VITAS and Roto-Rooter segments.

Revenue

Chemed's total revenue for the second quarter of 2025 was $618.80 million, demonstrating a 3.8% increase compared to $595.88 million in the same quarter of 2024.

Earnings/Net Income

Chemed's earnings per share (EPS) fell by 23.4% to $3.60 in 2025 Q2, down from $4.70 in 2024 Q2. The company reported net income of $52.49 million, a 25.9% decrease from $70.89 million in 2024 Q2. The EPS reflects a challenging quarter.

Price Action

The stock price of Chemed saw a slight decline of 0.21% during the latest trading day, rose by 2.61% over the most recent full trading week, but fell significantly by 16.40% month-to-date.

Post-Earnings Price Action Review

The strategy of purchasing Chemed (CHE) shares following a quarter of raised revenue and holding them for 30 days has underperformed over the past three years. This approach yielded a compounded annual growth rate (CAGR) of -0.91% and a total return of -4.44%, significantly lagging behind the benchmark, which delivered a CAGR of 87.35% and a total return of 87.35%. Despite the strategy's low risk profile, indicated by a maximum drawdown of 0.00% and a Sharpe ratio of -0.04%, it still resulted in substantial underperformance. The strategy's excess return was a staggering -91.79%, suggesting that simply holding the benchmark would have been far more profitable.

CEO Commentary

Kevin J. McNamara, CEO of Chemed, highlighted the mixed performance within the company’s segments. He reported a 5.8% rise in net patient revenue for VITAS due to increased average daily census but acknowledged challenges with a $19 million Medicare Cap billing limitation in Florida impacting revenue growth. McNamara expressed cautious optimism about VITAS's future, mentioning new operational strategies in Florida to mitigate cap risks and ongoing investments in Roto-Rooter, despite unexpected residential sector weakness.

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, a revenue rise of 1.25% to 1.75% is expected, with an adjusted EBITDA margin of 23.5% to 24.5%. The company revised its earnings per diluted share guidance to a range of $22.00 to $22.30, down from the previous $24.95 to $25.45, reflecting a cautious outlook amid evolving market conditions.

Additional News

In recent developments, Chemed announced the upcoming departure of Nicholas M. Westfall, Executive Vice President of Chemed and CEO of VITAS, after a successful 16-year tenure. He will remain with the company until December 1, 2025, to ensure a smooth transition. Joel L. Wherley, VITAS President and COO, will succeed Westfall as CEO. Additionally, Chemed has been actively repurchasing its shares, buying back 75,000 shares for $42.9 million in Q2 2025, with $182.6 million of repurchase authorization remaining. These strategic moves reflect the company's focus on leadership continuity and shareholder value enhancement.