Chemed's Q2 Earnings Fall Short, Stock Drops 9% Amid Operational Challenges and Revised Guidance

Chemed Corp's stock has declined 9.08% due to less-than-expected Q2 earnings and revised guidance. The company's key divisions, Vitas Healthcare and Roto-Rooter, faced operational challenges, leading to a 22% decline in adjusted EPS. Despite the decline, Chemed is undervalued, with a GF Value of $620.22 and a strong dividend yield. However, insider selling and immediate operational hurdles raise caution among investors.

Chemed Corporation (NYSE: CHE) reported its second-quarter 2025 results, which led to a 9.08% decline in its stock price. The company's key divisions, VITAS Healthcare and Roto-Rooter, faced operational challenges, resulting in a 22% decline in adjusted EPS. Despite these setbacks, Chemed remains undervalued, with a Graham Fair Value (GF Value) of $620.22 and a strong dividend yield. However, insider selling and immediate operational hurdles have raised caution among investors.

VITAS Healthcare Segment

The VITAS Healthcare segment reported a 5.8% increase in net patient revenue to $396.2 million, driven by a 6.1% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 4.2%. However, the combination of Medicare Cap and other contra revenue changes negatively impacted revenue growth by 379-basis points. The segment's adjusted EBITDA, excluding Medicare Cap, totaled $66.8 million, essentially flat with the same period of 2024. The adjusted EBITDA margin, excluding Medicare Cap, was 16.2%, a decrease of 163-basis points.

Roto-Rooter Segment

Roto-Rooter generated quarterly revenue of $222.6 million, an increase of 0.6% compared to the prior-year quarter. However, the segment's adjusted EBITDA declined by 18.7% to $48.6 million. The adjusted EBITDA margin in the quarter was 21.8%, a 517-basis point decline from the second quarter of 2024.

Consolidated Results

Chemed's consolidated revenue increased by 3.8% to $618.8 million, while GAAP diluted EPS decreased by 23.2% to $3.57. The company's adjusted diluted EPS was $4.27, a decrease of 21.9%. Chemed's total cash and cash equivalents as of June 30, 2025, were $249.9 million, and the company had no current or long-term debt.

Revised Guidance

Chemed revised its full-year 2025 guidance. VITAS full-year 2025 revenue, prior to Medicare Cap, is estimated to increase by 7.5% to 8.5% compared to 2024. Full-year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 18.2% to 18.7%. Roto-Rooter is forecasted to have a 1.25% to 1.75% revenue increase in 2025 compared to 2024. The company's full-year 2025 earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation, and other discrete items, is estimated to be in the range of $22.00 to $22.30.

Executive Management Departure

Executive Vice President and Chairman of Chemed, Nicholas M. Westfall, has announced his departure to pursue other opportunities. Joel L. Wherley, VITAS President and Chief Operating Officer, will succeed Mr. Westfall as Chief Executive Officer of VITAS.

Conclusion

Chemed's Q2 results and revised guidance have led to a decline in its stock price. However, the company's undervalued status, strong dividend yield, and operational challenges present both risks and opportunities for investors. As Chemed navigates these challenges, it will be crucial to monitor the company's progress and any updates to its guidance.

References

[1] https://www.chemed.com/news-releases/news-release-details/chemed-reports-second-quarter-2025-results-and-announces