Should Investors Hold Chemed Stock in Their Portfolio Now?

Core Viewpoint - Chemed Corporation (CHE) is positioned for growth due to strong operational performance in its VITAS segment and resilience in Roto-Rooter, despite facing macroeconomic challenges and competitive pressures [1][4]. Group 1: Financial Performance - Chemed has a market capitalization of $8.46 billion and an earnings yield of 4.46%, which is higher than the industry's 4.08% yield [2]. - The company has a historical average earnings growth rate of 14.1%, significantly outpacing the industry's 3.7% and the S&P 500's 8.1% growth [2]. - As of the end of Q3 2024, Chemed reported cash and cash equivalents of$ 238.5 million with no debt, and it repurchased 100,000 shares for $57.8 million [6]. Group 2: VITAS Segment Growth - The VITAS segment has shown a year-over-year growth of 17.3% in Q3 2024, aided by the acquisition of Covenant Health, which improved admissions by 6.3% and Average Daily Census (ADC) by 15.5% [3]. - Management is optimistic about VITAS's ability to continue hiring and retaining licensed healthcare professionals, leading to sustained growth in admissions and patient census [3]. Group 3: Roto-Rooter Resilience - Roto-Rooter has maintained its competitive edge despite challenges in consumer sentiment and spending, supported by strong brand awareness and customer service capabilities [4]. - The management has introduced initiatives such as adding commercial sales staff and enhancing customer relationship management to drive revenue growth [5]. Group 4: Macroeconomic and Competitive Challenges - Chemed faces macroeconomic headwinds, including rising labor and supply chain costs, with service costs increasing by 9.3% year-over-year in Q3 [9]. - The competitive landscape for Roto-Rooter and VITAS is challenging, with both segments needing to innovate to maintain market share in fragmented industries [10]. Group 5: Earnings Estimates - The Zacks Consensus Estimate for Chemed's 2024 earnings per share (EPS) is$ 23.09, with revenue estimates at $2.42 billion, indicating a 6.87% increase from the previous year [11].