Core Viewpoint - Chemed (CHE) is facing challenges due to macroeconomic impacts, seasonality, and competition, particularly affecting its Roto-Rooter business, leading to a Zacks Rank 4 (Sell) [1] Group 1: Challenges Facing Chemed - The Roto-Rooter business is struggling with headwinds in consumer sentiment and spending, prompting management to seek a new marketing agency for its paid search program [2] - The transition to a new SEM provider has contributed to a decline in residential revenues during the third quarter, although management remains optimistic about future improvements [3] - Global economic conditions, including labor shortages, supply chain issues, and inflation, are increasing operational costs, with service costs rising 9.3% year over year and SG&A expenses up 2.4% [4] Group 2: Competitive Landscape - Chemed's Roto-Rooter operates in a fragmented and competitive market for plumbing and drain services, facing competition from local and regional firms [5] - The hospice care segment, particularly VITAS, also faces competition from numerous organizations, necessitating a focus on quality and responsive services to maintain market position [5] Group 3: Positive Developments - The VITAS segment is showing strong growth, with a 17.3% year-over-year increase in the third quarter, bolstered by the $85 million acquisition of Covenant Health [8] - The acquisition has led to a 6.3% increase in admissions and a 15.5% rise in Average Daily Census (ADC), indicating a return to normalized operating conditions [8] - The aging population is expected to drive growth in the hospice market, increasing demand for end-of-life care and supportive services [9] - The global hospice market is projected to grow at a CAGR of 9.1% from 2023 to 2028, indicating favorable long-term trends for the industry [10]

Revenue and Sales Performance - For the three months ended September 30, 2024, consolidated service revenues and sales increased by 7.4% to $606,181,000 compared to $564,532,000 in the same period of 2023[103]. - VITAS experienced a 17.3% increase in service revenues, primarily driven by a 15.5% increase in days-of-care and a 2.6% increase in Medicare reimbursement rates[104]. - Roto-Rooter saw a 6.9% decrease in service revenues, attributed to declines across all service lines[104]. - Total revenues for the first nine months of 2024 increased by 6.7% to $1,791,294,000 compared to $1,678,505,000 in the same period of 2023[134]. - VITAS' routine homecare revenue for the first nine months of 2024 was $967,981,000, a 16.3% increase from $832,554,000 in 2023[135]. - Total net revenue for Q3 2024 was $399,148,000, compared to $340,801,000 in Q3 2023, indicating a growth of 17.1%[165]. - Homecare revenue for Q3 2024 reached $338,344,000, a significant increase from $287,389,000 in Q3 2023, marking a growth of 17.7%[165]. Income and Earnings - Adjusted net income for the three months ended September 30, 2024, was $85,485,000, up from $80,866,000 in 2023, representing a 8.0% increase[103]. - Net income for VITAS in Q3 2024 was $53,486,000, an increase from $44,331,000 in Q3 2023, reflecting improved revenue performance[130]. - Roto-Rooter's net income decreased to $37,955,000 in Q3 2024 from $50,327,000 in Q3 2023, impacted by declining revenue and increased SG&A expenses[131]. - Net income for the three months ended September 30, 2024, was $75,776 thousand, an increase from $74,958 thousand in the same period last year[159][160]. - Net income for the nine months ended September 30, 2024, was $211,680 thousand, up from $182,456 thousand in the same period last year, representing a year-over-year increase of 16.0%[162]. - Adjusted net income for the nine months ended September 30, 2024, was $248,735,000, up from $207,701,000 in the same period of 2023, representing an increase of 19.7%[164]. Expenses and Costs - Total SG&A expenses rose to $101,981,000 in Q3 2024, up 2.4% from $99,602,000 in Q3 2023, primarily due to salary increases and higher marketing expenses[124]. - Total SG&A expenses rose by 8.6% to $320.1 million in the first nine months of 2024 from $294.7 million in 2023, primarily due to normal salary increases and higher marketing expenses[138]. - The total costs and expenses for the consolidated entity were $514.0 million for the three months ended September 30, 2024[148]. - The company incurred a total of $11,700,000 in pretax costs related to stock options and long-term incentives in Q3 2023[152]. Margins and Profitability - Consolidated gross margin decreased to 34.6% in Q3 2024 from 35.8% in Q3 2023, while VITAS' gross margin improved to 24.6% from 24.0%[123]. - The consolidated gross margin increased to 34.6% in the first nine months of 2024 from 34.0% in the same period of 2023[137]. - VITAS' gross margin improved to 23.9% in the first nine months of 2024 compared to 20.2% in 2023, attributed to increased revenues and the expiration of the Retention Bonus Program[137]. - After-tax earnings as a percentage of revenue at VITAS increased to 13.1% in the first nine months of 2024 from 9.9% in 2023[144]. - Roto-Rooter's after-tax earnings as a percentage of revenue decreased to 17.8% in the first nine months of 2024 from 20.0% in 2023, primarily due to declining revenue and higher SG&A expenses[145]. Tax and Adjustments - The effective tax rate for Q3 2024 was 25.0%, up from 19.6% in Q3 2023, influenced by changes in state and local tax structures[127]. - The effective tax rate for the first nine months of 2024 was 24.2%, compared to 22.3% in 2023, influenced by a tax benefit from realigning the state and local corporate tax structure[141]. - The company recognized a total after-tax adjustment of $(9,709,000) in Q3 2024, compared to $(5,908,000) in Q3 2023, reflecting various impacts on earnings[129]. Cash Flow and Financial Position - Net cash provided by operating activities increased by $30.8 million from September 30, 2023, to September 30, 2024, primarily due to a $29.2 million increase in earnings[111]. - As of September 30, 2024, the company has approximately $404.8 million of unused lines of credit available under its revolving credit facility[115]. - The company had no variable rate debt outstanding as of September 30, 2024, mitigating interest rate risk exposure[168]. - For each $10 million borrowed under the credit facility, a 100 basis points change in interest rates would affect annual interest expense by $100,000[168]. - Interest expense for the nine months ended September 30, 2024, totaled $1,281 thousand, compared to $2,766 thousand in the same period last year[162]. Acquisitions and Investments - The acquisition of hospice operations and an assisted living facility from Covenant Health for $85 million was completed on April 17, 2024[106]. - The company reported a $81.8 million increase in goodwill primarily due to the Covenant acquisition[110]. - A $20.5 million increase in investments of deferred compensation plans was noted, mainly due to market valuation gains[110]. Future Outlook - Future outlook includes continued focus on service revenue growth and operational efficiency improvements across both VITAS and Roto-Rooter segments[151].

Financial Data and Key Metrics Changes - VITAS net revenue was $391.4 million in Q3 2024, an increase of 17.3% compared to the prior year period, driven by a 15.5% increase in days of care and a 2.6% increase in Medicare reimbursement rates [19][22] - Adjusted EBITDA for VITAS, excluding Medicare Cap, totaled $73.1 million, reflecting a 33.1% increase, with an adjusted EBITDA margin of 18.6%, up 212 basis points from the prior year [22] - Roto-Rooter generated quarterly revenue of $214.8 million, a decrease of 6.9% year-over-year, with residential revenue down 6.3% and commercial revenue down 5.9% [12][24][26] - Adjusted EBITDA at Roto-Rooter totaled $56.4 million, a decrease of 15.8% compared to the prior year, with an adjusted EBITDA margin of 26.3%, down 275 basis points [28] Business Line Data and Key Metrics Changes - VITAS admissions totaled 16,775, a 6.3% improvement from the same period in 2023, with average daily census (ADC) expanding to 21,785, an increase of 15.5% [8][33] - Roto-Rooter's call volume was down 11.7% year-over-year, impacting overall revenue performance [12][55] - Roto-Rooter experienced a sequential improvement in commercial revenue, which increased by 5% over Q2 2024 [16][26] Market Data and Key Metrics Changes - The acquisition of Covenant Health contributed $10 million to $11 million in revenue for VITAS in Q3 2024, translating to net income of approximately $1.8 million to $2 million [23] - The impact of Hurricane Helene on admissions was estimated to be a reduction of 60 to 100 patients, with expectations of a more significant impact in Q4 due to additional hurricanes [10][11] Company Strategy and Development Direction - VITAS is focused on sustainable expansion of its workforce and patient capacity, marking nine consecutive quarters of growth in clinical workforce capacity [31][40] - Roto-Rooter is implementing a new marketing strategy to improve residential and commercial revenue, with a focus on increasing call volume as a key metric for success [49][55] - The company remains optimistic about VITAS's growth potential, expecting above-average historical growth rates in the coming years [41][74] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in VITAS's ability to maintain strong admission and census growth, despite challenges faced by Roto-Rooter [17][80] - The company anticipates continued pressure on Roto-Rooter's residential side, with hopes for improvement in commercial revenue [72][74] - For 2025, VITAS expects high single to low double-digit growth in days of care, while Roto-Rooter is projected to have flattish revenue with no significant margin expansion [74][76] Other Important Information - The company has reduced its full-year 2024 earnings per diluted share guidance for Roto-Rooter, estimating a range of $23 to $23.15, reflecting a 13.3% to 14% increase from 2023 [29][30] - The integration of Covenant Health was completed smoothly, both operationally and culturally, enhancing VITAS's service capabilities [36] Q&A Session Summary Question: Long-term growth expectations for census and regional considerations - Management indicated strong occupancy levels and demand across markets, with expectations for growth above pre-pandemic levels [44][48] Question: Hurdle rates or benchmarks for the new marketing strategy at Roto-Rooter - Management emphasized that call count will be the primary metric for success, with current call volume down significantly [55] Question: Details on the new vendor managing online searches for Roto-Rooter - The new agency is expected to bring fresh ideas and strategies to improve online visibility and call volume [58][60] Question: Guidance for Roto-Rooter in Q4 and overall revenue expectations - Management expects similar revenue numbers for Roto-Rooter in Q4 compared to Q3, with no significant improvement anticipated [64] Question: High-level comments on growth for Roto-Rooter and VITAS in 2025 - Management is cautious about Roto-Rooter's residential side but optimistic about VITAS's growth potential, expecting above-average growth rates [72][74]

Core Insights - Chemed Corporation reported third-quarter 2024 adjusted earnings per share (EPS) of $5.64, a 6% increase year over year, but missed the Zacks Consensus Estimate by 2.1% [1] - The company's GAAP EPS was $5.00, reflecting a 1.4% increase from the previous year [1] - Revenues for the quarter improved by 7.4% year over year to $606.2 million, but also missed the Zacks Consensus Estimate by 1.1% [2] Revenue Breakdown - VITAS segment net revenues reached $391.4 million, up 17.3% year over year, driven by a 15.5% increase in days of care and a nearly 2.6% rise in the Medicare reimbursement rate [4] - Roto-Rooter segment reported sales of $214.8 million, down 6.9% year over year, with declines in various service categories [4][5] Margin Analysis - Gross profit increased by 3.9% year over year to $210 million, but gross margin contracted by 117 basis points to 34.6% due to a 9.3% rise in service costs [6] - SG&A expenses rose by 2.4% year over year to $102 million, while adjusted operating profit increased by 22.7% to $108 million, with adjusted operating margin contracting by 35 basis points to 17.8% [6] Liquidity and Capital Structure - Chemed ended the quarter with cash and cash equivalents of $238.5 million, up from $222.9 million at the end of the previous quarter, and had no current or long-term debt [7] - Cumulative net cash from operating activities was $252.6 million, compared to $221.7 million in the prior year [7] Share Repurchase and Dividends - The company repurchased 100,000 shares for $57.8 million, averaging $578.2 per share, with approximately $168.1 million remaining under its share repurchase authorization [8] - Chemed has a consistent dividend-paying history, with a five-year annualized dividend growth of 5.51% [8] Guidance and Outlook - Chemed maintained its 2024 revenue guidance for VITAS, expecting a revenue increase of 16.3-17.3% compared to the previous year [9] - The updated adjusted EPS outlook for 2024 is now in the range of $23.00-$23.15, down from the previous estimate of $23.55-$23.80, with the Zacks Consensus Estimate at $23.58, indicating a 16.2% growth over 2023 [10]

Core Viewpoint - Chemed reported quarterly earnings of $5.64 per share, missing the Zacks Consensus Estimate of $5.76 per share, but showing an increase from $5.32 per share a year ago [1][2] Financial Performance - The company posted revenues of $606.18 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.12%, compared to $564.53 million in the same quarter last year [3] - Chemed has surpassed consensus revenue estimates just once over the last four quarters [3] Stock Performance - Chemed shares have increased approximately 4.1% since the beginning of the year, while the S&P 500 has gained 22.1% [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $7.05 on revenues of $641.75 million, and for the current fiscal year, it is $23.58 on revenues of $2.44 billion [8] - The trend of estimate revisions for Chemed is mixed, which could change following the recent earnings report [7] Industry Context - The Medical - Outpatient and Home Healthcare industry is currently in the top 9% of over 250 Zacks industries, indicating a favorable outlook [9] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that industry performance can significantly impact stock performance [6][9]

Revenue Performance - Revenue for the third quarter of 2024 increased by 7.4% to $606.2 million compared to the prior-year period[4] - Service revenues for Q3 2024 reached $606.2 million, a 7.4% increase from $564.5 million in Q3 2023[28] - The company reported a total of $1.79 billion in service revenues for the nine months ended September 30, 2024, compared to $1.68 billion for the same period in 2023, reflecting a 6.5% increase[28] - Total net revenue for the nine months ended September 30, 2024, was $1,119,970,000, compared to $965,066,000 for the same period in 2023, reflecting a 16.0% increase[40] Earnings and Profitability - Adjusted diluted EPS rose by 6.0% to $5.64, while GAAP diluted EPS increased by 1.4% to $5.00[4] - Net income for Q3 2024 was $75.8 million, compared to $75.0 million in Q3 2023, reflecting a 1.1% increase[28] - Earnings per share for Q3 2024 were $5.04, up from $4.97 in Q3 2023, representing a 1.4% increase[28] - The company reported a net income of $211,680 for the nine months ended September 2024, compared to $182,456 for the same period in 2023, representing a 16.0% increase[38] Segment Performance - VITAS segment net patient revenue reached $391.4 million, marking a 17.3% increase, with average daily census up by 15.5%[4] - Roto-Rooter segment revenue decreased by 6.9% to $214.8 million, with net income down by 18.9% to $39.8 million[5] - Total revenue for VITAS in Q3 2024 was $70,887, while Roto-Rooter reported $56,382, showing a significant performance difference between the two segments[36] Cash and Assets - As of September 30, 2024, Chemed had total cash and cash equivalents of $238.5 million and no debt[16] - Cash and cash equivalents increased to $238.5 million in Q3 2024, up from $173.2 million in Q3 2023[31] - Total assets as of September 30, 2024, amounted to $1.77 billion, an increase from $1.56 billion as of September 30, 2023[31] Shareholder Returns - The company repurchased 100,000 shares for $57.8 million, with approximately $168.1 million remaining under its share repurchase authorization[18] - Full-year 2024 earnings per diluted share guidance is estimated to be in the range of $23.00 to $23.15, representing a 13.3% to 14.0% increase from 2023[19] Expenses and Costs - Selling, general and administrative expenses for Q3 2024 totaled $102.0 million, a 1.4% increase from $99.6 million in Q3 2023[29] - The cost of services provided and goods sold for the three months ended September 30, 2024, was $362,358,000, up from $230,804,000 in 2023, reflecting a significant increase of 57%[33] - Total costs and expenses for the nine months ended September 30, 2024, were $1,538,679,000, compared to $1,449,330,000 in 2023, indicating a rise of 6.2%[35] Cash Flow - Cash provided by operating activities for the nine months ended September 30, 2024, was $252,584,000, compared to $221,736,000 in 2023, an increase of 13.9%[32] - Net cash used by investing activities for the nine months ended September 30, 2024, was $131,391,000, significantly higher than $48,972,000 in 2023[32] - Net cash used by financing activities for the nine months ended September 30, 2024, was $146,700,000, compared to $73,740,000 in 2023, indicating an increase of 98.7%[32] Operational Metrics - Average revenue per patient per day for VITAS was $199.16, an increase of 139 basis points year-over-year[8] - Days of care in homecare increased to 1,622,680 in Q3 2024 from 1,391,377 in Q3 2023, representing a 16.6% growth[40] - Average daily census in homecare rose to 17,639 days in Q3 2024, compared to 15,124 days in Q3 2023, indicating a 16.6% increase[40] - Total admissions for the nine months ended September 30, 2024, were 51,020, an increase from 47,564 in the same period of 2023, marking a 5.2% rise[40] Tax and Interest - Income taxes for Chemed Corporation in Q3 2024 amounted to $67,662, compared to $37,778 in Q3 2023, showing a significant increase of 79.2%[37] - Interest expense for Chemed Corporation in Q3 2024 was $1,281, compared to $2,766 in Q3 2023, indicating a decrease of 53.7%[37] Strategic Investments - Covenant Health acquisition contributed approximately $10 million to $11 million in revenue for VITAS in Q3 2024[6] - The company incurred acquisition expenses of $386 in Q3 2024, while the nine-month total was $1,339, reflecting ongoing strategic investments[38] Miscellaneous - Estimated uncollectible accounts as a percent of revenues were 0.6% for Q3 2024, down from 1.3% in Q3 2023[41] - Days of revenue outstanding, including unapplied Medicare payments, was 37.5 days for Q3 2024, compared to 36.4 days in Q3 2023[41] - Significant credits/charges included stock option expenses of $(6,038,000) and long-term incentive compensation of $(3,083,000) for Q3 2024[42]

Core Viewpoint - Chemed Corporation (CHE) is anticipated to experience growth in the upcoming quarters, primarily driven by the VITAS business, while facing challenges from a sluggish macroeconomic environment and competitive disadvantages [1][7]. Group 1: Company Performance - Chemed's stock has increased by 11.7% over the past year, underperforming compared to the industry's growth of 33.9% and the S&P 500's increase of 32.3% [2]. - The company has a market capitalization of $8.72 billion and an estimated earnings growth rate of 16.2% for 2024, which is higher than the S&P 500's growth rate of 15.7% [2]. - In the trailing four quarters, Chemed delivered an average earnings surprise of 1.88% [2]. Group 2: Key Upsides - The VITAS segment has shown significant improvement, with a robust start to the second quarter following the acquisition of Covenant Health and Community Services, leading to an 11% increase in admissions and a 14.4% rise in Average Daily Census (ADC) [3][4]. - VITAS' net revenues increased by 16.7% year over year, supported by a 2.5% rise in the average Medicare reimbursement rate and a 14.4% increase in days of care [4]. - The net bedside headcount for VITAS increased by 234 licensed professionals, indicating a strong operational outlook [4]. - The Roto-Rooter brand has demonstrated resilience, maintaining strong close rates at the call center and during technician dispatch [5]. - The commercial plumbing business has seen unprecedented high demand post-pandemic, with initiatives to enhance sales staff and customer relationship management expected to positively impact performance [6]. Group 3: Key Downsides - Chemed faces macroeconomic headwinds, including rising staffing and labor costs, inflationary trends, and increased logistics costs, which have negatively impacted performance [7]. - In the second quarter, the cost of services provided and goods sold rose by 4.2% year over year, while selling, general, and administrative expenses increased by 7.7% [7]. - The competitive landscape for both Roto-Rooter and VITAS is challenging, with a need for innovation and effective market response to maintain operational success [8]. Group 4: Financial Estimates - The Zacks Consensus Estimate for Chemed's 2024 earnings per share (EPS) is $23.58, remaining constant over the past 30 days [9]. - The estimated revenues for 2024 are projected at $2.44 billion, indicating a 7.75% increase from the previous year [9].

It has been about a month since the last earnings report for Chemed (CHE) . Shares have added about 5.7% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Chemed due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Chemed Q2 Earnings Miss Estimates, Margins Rise Chemed Co ...

1 IF D H HT T 100 - 100 1 i T 1 Pgiam/iStock via Getty Images Investment update Following my last publication on Chemed Corporation (NYSE:CHE) the stock is flat, and I am reiterating my buy rating on the stock after its Q2 FY'24 earnings. The last publication, titled "Continues to compound shareholder value at double-digit returns" advocated to size into CHE based on a number of factors, all of which are still relevant today, namely: CHE is a long-term compounder with a cycle of producing high returns on th ...

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