Company Overview - Chemed Corporation operates two primary segments: VITAS, which provides hospice and palliative care services, and Roto-Rooter, offering plumbing, drain cleaning, and water restoration solutions [4][5] - The company generates revenue through direct service delivery to patients and customers via company-owned branches, independent contractors, and franchisees [4][5] - Chemed's primary customers include patients requiring end-of-life care and residential or commercial clients needing plumbing and related services across the United States [5] Financial Performance - For the trailing twelve months (TTM), Chemed reported revenue of $2.53 billion and net income of $278.81 million [3] - The company's dividend yield stands at 0.44% as of October 28, 2025 [3] - As of October 28, 2025, Chemed shares were priced at $438.94, reflecting a 27.91% decline over the past year and underperforming the S&P 500 by 45.55 percentage points [2] Recent Developments - Schwartz Investment Counsel reduced its position in Chemed by 28,771 shares, valued at approximately $13.03 million, bringing its stake down to 1.67% of reportable assets from 2.24% in the previous quarter [1][2] - Chemed's stock was demoted from the 11th-largest holding to the 17th place in Schwartz's portfolio by the end of September 2025 [6] - The hospice segment experienced a decline in adjusted EBITDA by 3.8% to $70.4 million, despite a 2.98% year-over-year increase in average revenue per day [8] - The Roto-Rooter segment's revenue grew by 1.1% year over year, but adjusted EBITDA declined by 12.4% [9]

Financial Data and Key Metrics Changes - VITAS net revenue was $407.7 million in Q3 2025, an increase of 4.2% compared to the prior year period, driven by a 2.5% increase in days of care and a 4.1% increase in Medicare reimbursement rates [11][12] - Adjusted EBITDA for VITAS, excluding Medicare cap, totaled $70.4 million, a decline of 3.8% year-over-year, with an adjusted EBITDA margin of 17.0%, down 157 basis points from the prior year [12][13] - Roto-Rooter revenue increased by 1.1% in Q3 2025 compared to the same period in 2024, with residential plumbing revenue up 8.2% [7][13] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,714 in Q3 2025, a 5.6% improvement from the same period in 2024, with hospital-directed admissions increasing by 10.4% [5][17] - Roto-Rooter branch residential revenue was $150.9 million, an increase of 3.4%, while commercial revenue totaled $55 million, up 2.8% [13][14] - Revenue from independent contractors declined by 4.7% in Q3 2025 compared to the same period in 2024 [14] Market Data and Key Metrics Changes - The percentage of total admissions from hospitals in Florida was 44.5% in Q3 2025, indicating a recovery in the mix of referral sources [6] - The average daily census for VITAS was 22,327 patients, an increase of 2.5% [17] Company Strategy and Development Direction - The company is focused on increasing hospital-based admissions to mitigate Medicare cap billing limitations, with a target ratio of 42% to 45% for hospital admissions [6][29] - VITAS is set to open a new location in Pinellas County in early November 2025, which is expected to enhance its service capacity [7][18] - Roto-Rooter is implementing operational initiatives to improve margins and stabilize growth, with a focus on managing lead generation costs [9][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the Florida Medicare cap issue will be resolved, with no expected billing limitations for 2026 [6][16] - The company anticipates a strong fourth quarter for both VITAS and Roto-Rooter, driven by seasonal demand and operational improvements [24][27] - Management indicated that the fourth quarter will be a significant indicator for 2026 growth strategies, with expectations for revenue growth in the 8% range and margins around 27.5% to 28% [36][37] Other Important Information - The company is actively working to address challenges faced by independent contractors to return this segment to a growth trajectory [14][15] - SG&A costs increased by $3.6 million in Q3 2025, primarily due to the shift from unpaid to paid leads [9][15] Q&A Session Summary Question: Can you run through demand and cost trends for each segment? - Management noted that seasonality impacts the fourth quarter, with VITAS typically performing better due to rate increases and Roto-Rooter benefiting from weather conditions [23][24] Question: What are the expectations for receivables and cash collections? - Management clarified that elevated DSO is primarily a timing issue related to Medicaid payments, not a deterioration in collection efforts [31] Question: How are margins expected to improve in Roto-Rooter? - Management indicated that while marketing costs are under pressure, they expect to absorb these costs through operational improvements and increased lead generation [52][53] Question: What is the outlook for VITAS in 2026? - Management stated that the fourth quarter will inform 2026 strategies, with expectations for improved revenue growth and margins based on operational adjustments [36][40] Question: How does the company view competitive dynamics in Roto-Rooter? - Management expressed optimism about improved competitive dynamics, noting that increased paid leads are yielding better results without significant competitive pressure [43][44]

Financial Data and Key Metrics Changes - VITAS net revenue was $407.7 million in Q3 2025, an increase of 4.2% compared to the prior year period [11] - Adjusted EBITDA for VITAS, excluding Medicare cap, totaled $70.4 million, a decline of 3.8% year-over-year [12] - Roto-Rooter revenue increased by 1.1% in Q3 2025 compared to the same period in 2024 [7] - Adjusted EBITDA at Roto-Rooter totaled $49.4 million, a decrease of 12.4% compared to the prior year quarter [15] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,714, a 5.6% improvement from the same period in 2024 [5] - Average revenue per patient day for VITAS was $205.08, up 2.98% from the prior year [12] - Roto-Rooter branch residential revenue increased by 3.4%, with residential plumbing revenue up 8.2% [13][8] - Revenue from independent contractors declined by 4.7% in Q3 2025 compared to the same period in 2024 [14] Market Data and Key Metrics Changes - The percentage of total admissions from hospitals in Florida was 44.5%, above the preferred range of 42% to 45% [6] - The average daily census for VITAS was 22,327 patients, an increase of 2.5% [17] - Hospital-directed admissions increased by 10.4%, while nursing home admissions declined by 8.9% [17] Company Strategy and Development Direction - The company aims to mitigate potential Florida Medicare cap billing limitations for fiscal 2026 [5] - VITAS is focusing on increasing hospital-based admissions to ensure long-term stability [6] - Roto-Rooter is implementing operational initiatives to stabilize and return to predictable growth [10] Management Comments on Operating Environment and Future Outlook - Management believes there will be no Medicare cap billing limitation related to the Florida program in 2026 [6] - The company is encouraged by the performance of both businesses in Q3 2025, with VITAS on track to resolve the Medicare cap issue [10] - Management anticipates a seasonal increase in demand and revenue in Q4 2025 [23] Other Important Information - The company has cleared hurdles to open a new location in Pinellas County, expected to open in early November [7] - The Medicare cap billing limitation for Q3 2025 was $6.1 million, slightly better than estimates [11] Q&A Session Summary Question: Insights on demand and cost trends for Q4 - Management noted that Q4 is typically stronger due to seasonal factors, with VITAS' margins expected to spike from the new rate increase [23][24] Question: Concerns about receivables and cash collections - Management indicated that elevated DSO is primarily a timing issue related to Medicaid payments, not a deterioration in collection efforts [31] Question: Growth rates and margins for 2026 - Management speculated on revenue growth in the 8% range and margins at 17.5%-18% for 2026, pending Q4 performance [37] Question: Sustainable margins in Roto-Rooter - Management indicated that while marketing costs are under pressure, they expect to absorb these costs through operational improvements [53] Question: Clarification on VITAS' Medicare cap liability - Management explained that the focus on hospital admissions and a favorable rate increase gives confidence in managing cap liability [65][69]

Group 1 - LRT Capital Management's "LRT Global Opportunities Strategy" reported a net return of -8.00% in September 2025, with a year-to-date return of -0.17% [1] - The strategy faced challenges as market indexes surged, particularly driven by a few overvalued mega-cap stocks, while the broader market declined [1] - The fund's top five holdings were highlighted as key picks for 2025 [1] Group 2 - Chemed Corporation (NYSE:CHE) is noted for its unique structure, operating in two non-correlated sectors: hospice care through VITAS and plumbing services through Roto-Rooter [3] - Chemed Corporation's one-month return was 5.91%, but it experienced a significant decline of 25.88% over the past 52 weeks [2] - As of October 6, 2025, Chemed Corporation's stock closed at $435.38 per share, with a market capitalization of $6.344 billion [2]

Core Insights - Urban Piping has launched a national initiative to replace polybutylene (Poly B) pipes in over 720,000 Canadian homes, starting in Calgary, Edmonton, and Vancouver [1][3] - The initiative is a response to a growing infrastructure crisis, with insurance companies preparing to cancel coverage for Poly B damage due to rising claims costs [3][7] - Emergency service calls related to Poly B failures have surged dramatically, indicating a significant increase in pipe failures as they reach the end of their lifespan [4][6] Industry Context - The insurance industry is tightening restrictions on Poly B coverage, leading to higher premiums and reduced coverage limits for affected homes [8][7] - A Supreme Court of Canada ruling in 2005 deemed polybutylene inadmissible for indemnity insurance, prompting insurers to reassess their policies [7] Market Focus - Urban Piping's expansion strategy targets western Canadian markets with the highest concentrations of affected properties, with Calgary having the highest density of Poly B pipes [9][10] - Edmonton and Vancouver are also key markets, with approximately 28,000 and 240,000 affected homes, respectively [10] Service Model - Urban Piping employs a complete in-house replacement model, managing the entire process from plumbing installation to drywall repair, providing homeowners with a single point of contact [11][12] - The company is offering free estimates and home inspections as part of a national awareness campaign to educate homeowners about Poly B systems and their insurance implications [12]

Core Thesis - Chemed Corporation (CHE) is viewed positively due to its strong market position in hospice care and plumbing services, with significant growth potential in the hospice market [1][2][5] Business Overview - Chemed operates two main businesses: VITAS, the largest hospice provider in the U.S., contributing 58% of revenue and growing around 9%, and Roto-Rooter, a plumbing service provider, contributing 42% of revenue and growing approximately 1.7% [2] - The U.S. hospice market is projected to grow from $29.9 billion to $39.1 billion by 2030, indicating a strong growth trajectory for VITAS [2] Financial Performance - Chemed generates annual free cash flow between $250 million and $367 million, has no debt beyond leases, and holds $249 million in cash, allowing for opportunistic share repurchases [4] - The stock is currently trading near multi-year lows on P/E and EV/EBITDA metrics, suggesting potential for re-rating as market focus shifts to 2026 earnings [4] Challenges and Mitigation Strategies - Recent stock price decline was attributed to a Medicare cap issue in Florida, which limited revenue recognition for VITAS due to higher state reimbursement rates [3] - Management has strategies in place to address these challenges, including increasing admissions and optimizing patient mix, which are expected to mitigate cap risks and create a $30 million cushion for 2026 [3][4] Market Outlook - The stock is seen as having a compelling risk/reward profile, with a potential upside of 26% as earnings improve, while downside risk is limited to approximately 12% [4] - The operational resilience and financial strength of Chemed support a bullish outlook despite recent short-term headwinds [5]

Core Insights - ServiceTitan has announced a strategic partnership with Roto-Rooter, enhancing Roto-Rooter's operations with ServiceTitan's technology to drive growth and profitability [1][2] - The partnership aims to unlock new revenue opportunities and improve operational efficiency across Roto-Rooter's extensive network [2][3] - Roto-Rooter, a leader in plumbing and water cleanup services, operates in 121 company-owned territories and over 345 franchise territories in the U.S. and Canada [6] Company Overview - ServiceTitan is a cloud-based software platform designed to support trades businesses, providing tools for business management and customer experience enhancement [5] - Roto-Rooter, founded in 1935, is the largest provider of plumbing, drain cleaning, and water cleanup services in North America, with a strong commitment to technological innovation [6][3] Partnership Impact - The partnership will leverage ServiceTitan's technology across Roto-Rooter's national call centers and branch locations, aiming to set a new standard for service excellence in the industry [4][3] - Roto-Rooter's field employees and office staff will benefit from increased efficiency and automation, allowing them to focus more on customer service [3][2]

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2025 was $30.9 million, an increase of 16.9% compared to $26.4 million in Q2 2024 [20] - Consolidated adjusted EBITDA for Q2 2025 was $1.7 million, down from $2.5 million in the prior year quarter [20] - Trailing twelve month adjusted run rate EBITDA for the businesses owned was approximately $22 million to $23 million [16] Business Line Data and Key Metrics Changes - In the KSX segment, revenue increased by 42.1% to $13.3 million in Q2 2025, up from $9.3 million in the same quarter a year ago [20] - Adjusted EBITDA for the KSX segment increased by 31% to $2.4 million compared to $1.8 million in the year-ago quarter [20] - Revenue for the Extended Warranty segment increased by 3.1% to $17.6 million in Q2 2025, up from $17.1 million in the prior year period [23] Market Data and Key Metrics Changes - The four largest midstream natural gas pipeline operators expect to increase their capacity by approximately 17% by 2026, indicating strong demand for additional pipeline capacity in the Permian Basin [9] - The shift from combustible engine motors to electric motors in the Permian Basin has increased from an estimated 10% in 2020 to over 20% today, suggesting a significant industry trend [10] Company Strategy and Development Direction - The company aims to accelerate growth through its public search fund strategy, increasing its target for KSX acquisitions from 2-3 per year to 3-5 per year [7] - The company is focused on building a diversified collection of high-quality services companies that are asset-light and generate recurring revenue [5] - The company is positioning itself to efficiently source, acquire, and scale additional businesses that fit its model [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth potential, stating that the second quarter marked significant progress with three acquisitions and increased capital for growth ambitions [19] - The company believes that the earnings power of its KSX segment is at a record high and is optimistic about future performance [19] - Management noted that the extended warranty segment remains cash generative and is well-positioned for continued success despite recent challenges [24] Other Important Information - The company completed a private placement of common shares, raising $15.7 million to support its growth strategy [6] - As of June 30, 2025, the company held $12.1 million in cash and cash equivalents, up from $5.5 million at year-end [24] - The company recorded a $600,000 expense related to a settlement agreement, which will not recur going forward [27] Q&A Session Summary Question: Clarification on run rate EBITDA - Management clarified that the run rate EBITDA of $22 million to $23 million includes both existing businesses and recent acquisitions [32] Question: Future acquisition expectations - Management indicated that they do not plan to stop acquisitions after reaching their target range and will continue to seek opportunities [38][40] Question: Active OIRs and talent pipeline - Management confirmed there are currently two active OIRs and expressed intentions to increase this number, highlighting a strong pipeline of talent [41][42] Question: Learning from acquisitions - Management acknowledged learning from past acquisitions and emphasized a tighter focus on revenue quality and recurring revenue in future deals [44] Question: Attributes of future OIRs - Management stated that while future OIRs may vary, they will continue to seek candidates with specific attributes indicative of success in small company leadership [47]

Core Insights - Chemed missed expectations on both revenue and earnings for Q2, leading to a 9% decline in share price [1] - The company reported a 4% increase in sales but a significant 22% drop in adjusted earnings per share (EPS) [2] - Management has lowered the 2025 EPS guidance from $25.20 to $22.15, indicating a 4% decline from the previous year [2] - CEO of Vitas Healthcare, Nick Westfall, announced his resignation, adding to the uncertainty surrounding the company [2] Revenue and Profitability - Chemed's Q2 revenue growth was steady at 4%, but profitability issues were evident across all business segments [3] - Vitas Healthcare experienced a 4% revenue growth but faced Medicare cap billing limitations, resulting in a 24% decline in earnings [4] - Excluding one-time impacts, Vitas's adjusted EBITDA remained flat for the quarter [4] Roto-Rooter Performance - Roto-Rooter, Chemed's plumbing business, achieved only 1% sales growth while net income fell by 20% due to increased marketing costs [6] - The company faces challenges from advertising pressures, particularly from Google, which affects visibility in free search areas [6] - Despite these challenges, Roto-Rooter remains the largest plumbing company in North America, warranting investor attention [7] Future Outlook - Chemed is currently navigating several challenges but is valued at 20 times free cash flow, suggesting potential for a turnaround [7]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Chemed despite higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - Chemed is expected to report quarterly earnings of $4.76 per share, reflecting a 13% decrease year-over-year, while revenues are projected to be $619.83 million, a 4% increase from the previous year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 9.39% over the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate matches the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%, suggesting no recent differing analyst views [12]. Historical Performance - Chemed has beaten consensus EPS estimates in two out of the last four quarters, with a recent surprise of +0.54% when it reported earnings of $5.63 per share against an expectation of $5.6 [13][14]. Zacks Rank - The stock currently holds a Zacks Rank of 4, indicating a less favorable outlook for an earnings beat [12]. Conclusion - Chemed does not appear to be a strong candidate for an earnings beat, and investors should consider other factors before making investment decisions [17].