Chemed's Q2 Earnings Miss Estimates, Shares Down 9% as Vitas Healthcare and Roto-Rooter Face Profitability Issues

Chemed's Q2 sales grew 4%, but adjusted EPS declined 22%. Both business segments faced profitability issues, with Vitas' earnings dropping 24% due to Medicare cap billing limitations and Roto-Rooter's net income declining 20% due to increased marketing costs. Management cut 2025 EPS guidance and announced the CEO of Vitas Healthcare is stepping down. Chemed's shares declined 9% after the earnings release.

Chemed Corporation (NYSE: CHE) reported its second-quarter 2025 earnings, revealing a mixed performance with notable challenges across both business segments. Revenue grew by 4% year-over-year, reaching $618.8 million, but adjusted earnings per share (EPS) declined by 22%, falling to $4.27 per share [1].

The company's two primary business units, VITAS and Roto-Rooter, both faced significant profitability issues. VITAS, the hospice care division, saw its earnings drop by 24% due to Medicare cap billing limitations, while Roto-Rooter's net income declined by 20% due to increased marketing costs [1]. These challenges led to a reduction in the company's full-year 2025 EPS guidance, which was revised downward to $22.00-$22.30 from the previous $24.95-$25.45 [2].

Management also announced the departure of the CEO of VITAS Healthcare, Nick A. Sposato, who had been with the company for over thirteen years. The company thanked him for his service and wished him well in his next pursuits [1]. Kevin J. McNamara, Chemed's Chief Executive Officer, emphasized the company's strategic focus on acquisitions and managing Medicare cap issues.

The earnings report was not well-received by investors, with Chemed's stock price declining by 9% after the announcement, closing at $430.20 [2]. The stock fell to $430.20, moving closer to its 52-week low of $410. Despite the challenges, the company maintains a strong financial health score of 3.05 out of 5, with robust cash flows sufficient to cover interest payments and a conservative debt-to-equity ratio of 0.12 [2].

Looking ahead, Chemed anticipates improved performance in the latter half of the year, with VITAS revenue expected to increase by 7.5%-8.5% and Roto Rooter projecting a 1.25%-1.75% revenue increase. However, the company faces significant risks, including competitive pressures in the hospice market, particularly in Florida, and changes in digital advertising affecting Roto Rooter's lead generation [2].

References:
[1] https://finance.yahoo.com/news/chemed-nyse-che-q2-earnings-221340833.html
[2] https://www.investing.com/news/transcripts/earnings-call-transcript-chemed-misses-q2-2025-estimates-shares-drop-93CH-4160806