Chemed Corporation

What they do

VITAS provides hospice and palliative care through physicians, registered nurses, home health aides, social workers, clergy and volunteers, operating 33 Medicare provider numbers across 59 programs from 182 facilities and 28 inpatient units in 17 states and the District of Columbia. Roto-Rooter provides plumbing, drain cleaning, excavation, water restoration and related services to residential and commercial customers through company-owned branches, independent contractors and franchisees, reaching over 90% of the U.S. population. The two segments are managed on a decentralized basis, with corporate responsible for long-term strategy, capital allocation, financial reporting, tax, legal and executive selection.

Revenue drivers

• VITAS hospice and palliative care — Second-quarter 2026 net patient revenue was $443.3 million, up 11.9%, driven by 6.1% growth in days-of-care and a roughly 2.4% geographically weighted average Medicare reimbursement rate increase; over 90% of VITAS revenue comes from the U.S. government through Medicare.
• Roto-Rooter plumbing, drain cleaning and excavation — Second-quarter 2026 revenue was $229.9 million, up 3.3%, with branch commercial revenue of $56.8 million (plumbing +11.9%, drain cleaning +6.9%, water restoration +3.7%); growth came from plumbing, drain cleaning and excavation, partly offset by lower water restoration.
• Medicare Cap and contra revenue adjustments — Changes in Medicare Cap and other contra revenue items added 455 basis points to VITAS revenue growth in Q2 2026 versus the prior-year quarter, as the Medicare Cap accrual fell to $0.5 million from $16.4 million a year earlier.
• Acuity and level-of-care mix — Average revenue per patient per day was $209.98 in Q2 2026, up 143 basis points year over year; routine home care averaged $188.62 and high-acuity care $1,152.14, with high-acuity days at 2.2% of total days-of-care, down 24 basis points.

Recent performance

For second-quarter 2026, Chemed reported revenue of $673.3 million, up 8.8%, GAAP diluted EPS of $5.13 (up 43.7%) and adjusted diluted EPS of $6.06 (up 41.9%). Consolidated adjusted EBITDA was $121.8 million, or 18.1% of revenue, versus $95.3 million and 15.4% a year earlier. VITAS revenue rose 11.9% to $443.3 million with average daily census of 23,687 (+6.1%) and admissions of 19,125 (+9.0%), while Roto-Rooter revenue rose 3.3% to $229.9 million with adjusted EBITDA essentially flat at $48.5 million and margin down 77 basis points to 21.1%. For the six months ended June 30, 2026, revenue was $1,330.8 million, up from $1,265.7 million, and net income was $134.0 million versus $124.3 million.

Strategy

Chemed describes itself as purchasing, operating and divesting subsidiaries to maximize shareholder value, with day-to-day operations managed on a decentralized basis and corporate handling long-term strategic planning, significant capital allocation, investments, financial reporting, tax, legal and key executive selection. Capital returned to shareholders has grown, with dividends per share rising from $1.40 in 2021 to $2.20 in 2025. Management is monitoring inflation, recently implemented and potential additional tariffs, and the impact of the war with Iran on fuel prices, and says it does not expect a material negative effect on 2026 net sales or profitability based on preliminary analysis, while continuing to evaluate pricing actions and cost savings for fiscal 2027 planning. Both segments continue to analyze new services and market development, but the company does not expect such efforts to require material asset investment.

Risks

• Medicare concentration at VITAS — Over 90% of VITAS revenue comes from the U.S. government through Medicare, so the loss of a portion or all of that revenue would materially affect the company.
• Medicare Cap billing limitations — Four of VITAS' 33 Medicare provider numbers carry a Medicare Cap billing limitation totaling $7.0 million, and 22 have an anticipated full-year cap cushion of 10% or greater.
• Weather and seasonality at Roto-Rooter — Roto-Rooter revenue and operating results are affected by significant precipitation or temperature changes in areas with company-owned and independent contractor operations.
• Macroeconomic and tariff pressure — Management cites high inflation, recently implemented tariffs, potential additional tariffs, and the war with Iran's impact on fuel prices as factors that may negatively affect net sales and profitability in the future.

Outlook

Chemed raised full-year 2026 guidance on July 28, 2026, primarily due to VITAS outperformance. Management expects no Medicare Cap billing limitation for the Florida combined program and none for the 2026 fiscal period. For the remainder of fiscal 2026, the company does not expect a material negative effect from announced tariffs and other monitored factors, but is evaluating pricing actions and cost savings for fiscal 2027 planning.