Chemed Shares Plunge 15% on Earnings Miss and Operational Struggles Volume Surges 179% to 320 Million Ranking 428th in U.S. Equities

Market Snapshot

Chemed (CHE) shares fell 15.00% on February 26, 2026, marking one of the largest single-day declines in the company’s recent history. Trading volume surged by 179.02% to $0.32 billion, ranking the stock 428th in volume among U.S. equities. The sharp drop followed the company’s Q4 2025 earnings report, which missed both revenue and profit estimates, with adjusted EPS of $6.42 on $639.3 million in revenue—$0.61 and $19.8 million below consensus, respectively. The stock closed at a 52-week low, reflecting investor concerns over operational challenges and revised 2026 guidance.

Key Drivers

Earnings Shortfall and Operational Weakness

Chemed’s Q4 2025 results were marred by underperformance across both its VITAS Healthcare and Roto-Rooter segments. VITAS, the hospice care unit, reported a 1.7% decline in adjusted EBITDA to $91.6 million, with its EBITDA margin contracting 79 basis points to 21.7%. This was attributed to an overreliance on short-stay hospital admissions in Florida, which boosted Medicare Cap compliance but depressed revenue growth and margins. Roto-Rooter, the plumbing and restoration services unit, saw a 3.7% revenue decline, driven by a 10.3% drop in water restoration services and increased write-offs tied to stricter insurance scrutiny. Management acknowledged that these issues, compounded by higher marketing costs, led to a 477-basis-point margin contraction to 21.5%.

Strategic Shifts and Uncertain Outlook

In response to the Q4 setbacks, Chemed initiated strategic adjustments. For VITAS, leadership emphasized refocusing admissions to balance hospital-based and community-based patients, aiming to rebuild revenue growth and EBITDA margins in 2026. The company also secured a certificate of need to expand into Manatee County, Florida, a market with 3,000 Medicare hospice patients in 2024. However, these initiatives face hurdles. For Roto-Rooter, management highlighted centralizing billing and collections, hiring commercial business managers, and leveraging a new SEO provider to combat declining organic leads. Despite these steps, 2026 guidance—projecting 3% to 3.5% revenue growth and $23.25–$24.25 adjusted EPS—was criticized as cautious, with Bank of America downgrading the stock to Neutral, citing “structural headwinds” in Roto-Rooter.

Investor Sentiment and Market Reaction

The earnings miss and revised guidance triggered a significant sell-off, with the stock dropping to $388.10, a 37.3% decline from its 52-week high. Analysts highlighted the divergence between VITAS’s stable growth potential and Roto-Rooter’s ongoing struggles. While VITAS’s improved Florida Medicare Cap position—up $25 million year-over-year—offered some optimism, the broader market questioned the company’s ability to sustain profitability. Bank of America’s downgrade underscored concerns that Roto-Rooter’s EBITDA has contracted for three consecutive years, with its 2026 guidance seen as insufficient to restore confidence. Additionally, the stock’s 15% plunge mirrored a similar drop in August 2025 after Chemed warned of a $18–$25 million Medicare Cap shortfall for VITAS, suggesting recurring volatility tied to regulatory and operational risks.

Share Repurchases and Capital Allocation

Amid the downturn, Chemed continued its share repurchase program, buying back 400,000 shares at an average price of $436.39 in Q4. However, this effort to return capital to shareholders was overshadowed by the earnings disappointment. The company also highlighted $2.9 billion in repurchases since the program’s inception, yet the recent price decline suggests limited appetite for the stock at current levels. Management’s emphasis on balancing growth and margin stability in 2026 remains unproven, with investors wary of whether adjustments in admissions strategy and operational efficiency can offset persistent challenges in both business lines.

Legal and Regulatory Risks

A separate filing by Johnson Fistel PLLP raised potential legal concerns, investigating whether Chemed’s leadership may have misled investors regarding its financial disclosures. While the firm’s inquiry is preliminary, it adds to the uncertainty surrounding the company’s governance and transparency. Regulatory risks, particularly in the Medicare Cap program, remain a critical overhang, as any miscalculations could lead to further revenue shortfalls. For now, the focus remains on whether Chemed’s strategic shifts—ranging from market expansion to operational restructuring—can stabilize its financial trajectory and restore investor confidence.