# Chemed Corporation (CHE)

**Exchange:** NYSE  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-29  
**Report type:** Primer (steps 1–3 of 19)  
**API endpoint:** GET /api/v1/research/CHE/primer

## Business Model

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source: coverage-next-full | ticker: CHE | step: "01" | created: 2026-05-29
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### Step 01 — Business Overview: Chemed Corporation (CHE)

#### Company Summary

Chemed Corporation is a Cincinnati-based holding company that owns two operationally distinct but financially complementary businesses: VITAS Healthcare, the largest for-profit hospice provider in the United States, and Roto-Rooter, the nation's leading consumer plumbing and drain cleaning services brand. The combination is unusual — healthcare services and home services — but produces a powerful and diversified cash flow engine with defensive characteristics in both segments.

#### The Two-Segment Structure

##### VITAS Healthcare (~70% of Revenue)

VITAS Healthcare Corporation is the crown jewel of Chemed's portfolio. Founded in 1978 in Miami, Florida, VITAS was acquired by Chemed in 2004 and has since grown to become the largest for-profit hospice provider in the US by both revenue and average daily census (ADC). VITAS serves terminally ill patients with a prognosis of six months or less, providing palliative care in patients' homes, nursing facilities, assisted living facilities, and inpatient hospice units.

**Key Characteristics:**
- Serves approximately 18,000-20,000 patients per day (ADC)
- Operates in 14 states + Washington D.C. (primary footprint: Florida, Ohio, Texas, California, New Jersey, Georgia)
- Revenue is almost entirely Medicare and Medicaid reimbursed (~98%)
- Revenue model is per-diem: Medicare pays a daily rate per patient enrolled in hospice benefit
- Four levels of care: Routine Home Care (RHC, ~95% of patient days), Continuous Home Care, Inpatient Respite Care, General Inpatient Care (GIP)
- Medicare hospice benefit is federally mandated and updated annually via CMS rulemaking

**Competitive Position:**
- #1 for-profit hospice provider in the US (ahead of Amedisys/LHC, Encompass, and thousands of small regional operators)
- Scale advantages in nurse hiring, Medicare cost report management, and regulatory navigation
- Certificate of Need (CON) regulations in some states provide partial competitive barriers

##### Roto-Rooter (~30% of Revenue)

Roto-Rooter Group, Inc. traces its roots to 1935 and is one of America's most recognized home services brands. It provides plumbing repair and maintenance, drain cleaning, water restoration, and HVAC services across the US and Canada through a combination of company-owned branches and franchised operations.

**Key Characteristics:**
- Revenue from company-owned branches (majority) and franchise royalties
- Emergency plumbing services: ~55-60% of revenue (non-discretionary, 24/7/365 call response)
- Water/fire/smoke restoration and HVAC: ~40-45% of revenue
- Operates in all 50 states + Canada
- ~50,000+ service calls per week at peak

**Competitive Position:**
- #1 consumer plumbing brand by brand recognition and revenue
- Franchise network creates national coverage with capital-light economics
- 24/7 emergency response creates recurring, high-urgency demand

#### Why This Combination Works

The two businesses are complementary in several important ways:

1. **Counter-cyclicality**: VITAS is recession-resistant (hospice demand is demographic-driven), while Roto-Rooter is largely non-discretionary (plumbing emergencies don't pause in recessions). Both hold up well in downturns.

2. **Cash flow diversity**: VITAS generates predictable, government-reimbursed cash flows. Roto-Rooter generates market-rate consumer cash flows. Neither is correlated with the other.

3. **Capital allocation flexibility**: Roto-Rooter's higher EBITDA margins and lower reinvestment needs generate excess cash that funds VITAS capacity expansion and corporate buybacks/dividends.

4. **Management bandwidth**: Both businesses are operationally mature with dedicated management teams. Chemed corporate functions as a lean holding company.

#### Historical Context

Chemed was originally spun out of W.R. Grace & Co. in 1982. For decades it held diversified industrial/chemical businesses. The strategic transformation began with the Roto-Rooter acquisition in 1987 and culminated with the VITAS acquisition in 2004 for ~$406M — one of the best acquisitions in healthcare services history given VITAS's subsequent growth.

#### Investment Narrative

Chemed is a classic "quality compounder" story:
- Secular tailwind in hospice (aging US population, growing Medicare hospice utilization)
- Dominant #1 market positions in both segments
- Predictable, high-quality earnings with minimal capex requirements
- Management team with exceptional capital allocation record (buybacks, dividends, no dilutive M&A)
- Stock trades at a modest premium to the market but at a discount to pure-play healthcare services peers

#### Revenue Mix (Approximate FY2024)

| Segment | Revenue | % of Total |
|---------|---------|------------|
| VITAS Healthcare | ~$1.67B | ~70% |
| Roto-Rooter | ~$720M | ~30% |
| **Total** | **~$2.39B** | **100%** |

#### Operating Structure

Chemed employs approximately 16,000-17,000 people across both segments (VITAS is the larger employer, primarily nurses, social workers, chaplains, and home health aides). Roto-Rooter employs technicians, dispatchers, and administrative staff.

#### Key Investor Considerations

- **VITAS Medicare mix**: Any changes to CMS hospice reimbursement rates directly impact ~70% of Chemed's revenue
- **ADC trajectory**: The single most important VITAS metric; COVID disrupted hospice referral patterns for 2+ years
- **Roto-Rooter normalization**: Post-COVID correction in plumbing demand is largely behind the company
- **Litigation/settlement risk**: VITAS settled a significant False Claims Act investigation in 2023; risk is always present in a Medicare-reimbursed business

## Financial Snapshot

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source: coverage-next-full | ticker: CHE | step: "04" | created: 2026-05-29
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### Step 04 — Financial Snapshot: Chemed Corporation (CHE)

#### Annual Financial Summary (FY2021–FY2024)

##### Income Statement Overview

| Metric | FY2021 | FY2022 | FY2023 | FY2024 |
|--------|--------|--------|--------|--------|
| Total Revenue | $2,140M | $2,183M | $2,291M | $2,390M |
| Revenue Growth | +6.3% | +2.0% | +4.9% | +4.3% |
| VITAS Revenue | $1,491M | $1,509M | $1,569M | $1,670M |
| Roto-Rooter Revenue | $650M | $671M | $722M | $720M |
| Gross Profit | ~$750M | ~$760M | ~$810M | ~$860M |
| Gross Margin | ~35% | ~35% | ~35% | ~36% |
| Operating Income (GAAP) | ~$250M | ~$245M | ~$280M | ~$320M |
| Operating Margin | ~11.7% | ~11.2% | ~12.2% | ~13.4% |
| Net Income (GAAP) | ~$185M | ~$175M | ~$200M | ~$240M |
| Diluted EPS (GAAP) | ~$12.00 | ~$11.90 | ~$14.10 | ~$17.20 |
| Adjusted EPS | ~$17.50 | ~$16.50 | ~$18.50 | ~$22.00 |
| Adjusted EBITDA | ~$340M | ~$335M | ~$370M | ~$420M |

*Note: All figures are approximate estimates based on publicly available data and analyst consensus. Actual reported figures may differ.*

##### Segment Operating Performance

| Segment | FY2021 | FY2022 | FY2023 | FY2024 |
|---------|--------|--------|--------|--------|
| **VITAS Operating Income** | ~$155M | ~$140M | ~$170M | ~$210M |
| VITAS Operating Margin | ~10.4% | ~9.3% | ~10.8% | ~12.6% |
| **Roto-Rooter Operating Income** | ~$165M | ~$168M | ~$183M | ~$180M |
| Roto-Rooter Operating Margin | ~25.4% | ~25.0% | ~25.3% | ~25.0% |

##### Key Earnings Notes by Year

**FY2021:**
- Roto-Rooter benefited from COVID pull-forward effect (Americans spending more time at home, accelerating plumbing maintenance + restoration work)
- VITAS ADC was pressured by COVID — hospital lockdowns disrupted normal hospice referral pathways from physicians and SNFs
- VITAS admissions and ADC recovered slowly through H2 2021
- Adjusted EPS ~$17.50 included benefits from lower travel costs, deferred expenses

**FY2022:**
- VITAS continued to grapple with COVID-related ADC suppression (admissions were weaker than pre-COVID baseline)
- Department of Justice / OIG investigation into VITAS billing practices created significant legal overhang
- Management set aside litigation accruals; adjusted EPS excluded legal expenses (~$20-30M pretax per year)
- Roto-Rooter showed slight growth but began normalizing from COVID peak
- VITAS nursing labor cost inflation was a headwind (~5-8% wage increases)

**FY2023:**
- VITAS settled the DOJ/OIG investigation for approximately $75M — a significant but manageable amount
- Post-settlement, VITAS began recovering ADC as the legal cloud lifted and referral relationships normalized
- VITAS ADC growth resumed in H2 2023
- Roto-Rooter revenue grew ~8% on strong pricing; water restoration segment performed well
- Adjusted EPS ~$18.50 benefited from settlement of uncertainty

**FY2024:**
- VITAS ADC recovery accelerated — a meaningful inflection year
- Medicare hospice base rate increased ~3.1% for FY2024 (CMS final rule)
- VITAS revenue per patient day rose on favorable mix (higher GIP utilization + SIA payments)
- Roto-Rooter revenue flat YoY (~-0.3%) — housing market slowdown and normalization from elevated restoration work
- Adjusted EPS ~$22.00 — significant acceleration from FY2023
- Strong FCF generation enabled continued buybacks

---

#### Adjusted vs. GAAP Reconciliation

Management presents "adjusted" results that exclude:
1. Litigation and investigation charges (DOJ/OIG, other legal matters)
2. Acquisition-related amortization
3. Non-cash stock compensation (partially excluded)
4. Other non-recurring items

The adjusted EPS figures are widely used by sell-side analysts and management compensation is tied to adjusted targets. The GAAP-adjusted gap widened in FY2022-2023 due to the investigation and settlement charges.

| Year | GAAP EPS | Adjusted EPS | Delta | Primary Driver |
|------|---------|------------|-------|----------------|
| FY2021 | ~$12.00 | ~$17.50 | ~$5.50 | Stock comp, amortization |
| FY2022 | ~$11.90 | ~$16.50 | ~$4.60 | Legal accruals, amortization |
| FY2023 | ~$14.10 | ~$18.50 | ~$4.40 | Settlement, amortization |
| FY2024 | ~$17.20 | ~$22.00 | ~$4.80 | Amortization, stock comp |

---

#### Profitability Metrics

| Metric | FY2021 | FY2022 | FY2023 | FY2024 |
|--------|--------|--------|--------|--------|
| Gross Margin | ~35% | ~35% | ~35% | ~36% |
| EBITDA Margin | ~15.9% | ~15.3% | ~16.2% | ~17.6% |
| Net Margin (GAAP) | ~8.6% | ~8.0% | ~8.7% | ~10.0% |
| Effective Tax Rate | ~24% | ~24% | ~24% | ~24% |

---

#### Cash Flow Summary

| Metric | FY2021 | FY2022 | FY2023 | FY2024 |
|--------|--------|--------|--------|--------|
| Cash from Operations | ~$290M | ~$270M | ~$300M | ~$350M |
| Capex | ~$75M | ~$80M | ~$85M | ~$90M |
| Free Cash Flow | ~$215M | ~$190M | ~$215M | ~$260M |
| FCF Margin | ~10% | ~8.7% | ~9.4% | ~10.9% |
| FCF/Adjusted Net Income | ~80% | ~75% | ~75% | ~80% |

Capex is primarily for VITAS inpatient unit construction/leasehold improvements and IT systems. Roto-Rooter capex is modest (fleet, equipment).

---

#### Valuation Context

| Metric | FY2024A | FY2025E |
|--------|--------|--------|
| Revenue | ~$2,390M | ~$2,520M |
| Adjusted EPS | ~$22.00 | ~$24.00 |
| Adjusted EBITDA | ~$420M | ~$460M |
| P/E (Adjusted, at ~$500 price) | ~22.7x | ~20.8x |
| EV/EBITDA (at ~$7.5B EV) | ~17.9x | ~16.3x |
| FCF Yield | ~3.5% | ~4.0% |

Chemed typically trades at 20-25x adjusted earnings — a premium to the S&P 400 but below pure-play healthcare services names. The discount to healthcare peers partly reflects the Roto-Rooter "conglomerate discount" and the VITAS Medicare regulatory risk premium.

## Recent Catalysts

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source: coverage-next-full | ticker: CHE | step: "12" | created: 2026-05-29
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### Step 12 — Catalysts: Chemed Corporation (CHE)

#### Near-Term Catalysts (0-12 Months)

##### 1. VITAS ADC Inflection Confirmation (Q1-Q2 2025)

The most important near-term catalyst is confirmation that VITAS's ADC growth has reached a new secular trend, not a cyclical bounce. Q4 2024 ADC of ~20,500 was an all-time high. If Q1 2025 (seasonally the strongest quarter) shows ADC of 21,000+, it would confirm that:
- Baby Boomer mortality wave is now a visible contributor to census growth
- Post-COVID ADC suppression is fully behind the company
- The DOJ settlement had created operational headwinds that have now fully cleared

A strong Q1 2025 ADC print would likely cause upward revisions to FY2025 and FY2026 estimates.

##### 2. CMS FY2025 Final Hospice Rule

CMS typically issues the final hospice reimbursement rule in August, effective for the following fiscal year. The FY2025 rule (effective Oct 1, 2024) already set the rate at ~+2.9%. The FY2026 proposed rule (issued spring 2025) will set the next year's rate. A favorable rate update of 3%+ would:
- Provide direct revenue uplift for VITAS (~$50M revenue impact per 1% rate change at $1.7B base)
- Potentially trigger EPS estimate upgrades

##### 3. Roto-Rooter Revenue Comps Ease (H2 2025)

Roto-Rooter's revenue comparison base becomes easier in H2 2025 (the company was already showing YoY declines in H2 2024). Any stabilization or return to growth in Roto-Rooter volumes would:
- Remove the modest negative sentiment around the segment
- Allow Roto-Rooter to contribute positively to consolidated revenue growth again

##### 4. Accelerated Buyback Activity

With Net Debt/EBITDA at ~1.2x and FCF approaching $260-280M/year, management has significant capital allocation flexibility. An accelerated buyback (above the ~$215M FY2024 pace) or a buyback authorization increase would:
- Signal management confidence in the trajectory
- Accelerate EPS growth through faster share count reduction

---

#### Medium-Term Catalysts (1-3 Years)

##### 5. VITAS Geographic Expansion

VITAS currently operates in 14 states + DC. The US has ~50 states and VITAS is absent or underrepresented in large markets such as:
- New York, Pennsylvania, Illinois, Michigan, North Carolina
- Each new program launch takes 12-24 months to reach breakeven, then compounds

New market launches would be a catalyst for re-rating the ADC growth multiple.

##### 6. Medicare Advantage Hospice Carve-In

The GUIDE model (CMS's Guiding an Improved Dementia Experience pilot) and discussions around potentially moving hospice from traditional Medicare into Medicare Advantage are long-term policy debates. A managed care "carve-in" could:
- Alter per-diem reimbursement to a capitated model
- Potentially favor large operators (VITAS) over small ones in contract negotiations
- Create significant uncertainty in the near-term but structural opportunity for scale players

##### 7. Roto-Rooter Housing Recovery

If the Federal Reserve's rate-cutting cycle accelerates housing market normalization (more home sales, more renovation activity), Roto-Rooter could see its non-emergency restoration segment recover. This could restore segment revenue growth to the 4-6% range.

##### 8. Sum-of-Parts Recognition / Potential Spin-off

Chemed's conglomerate structure creates a persistent valuation discount vs. peers:
- VITAS would likely trade at 14-16x EBITDA as a standalone (in line with hospice M&A multiples)
- Roto-Rooter would likely trade at 12-14x EBITDA as a standalone
- The combined entity trades at ~17-18x EBITDA

If management ever pursued a separation of Roto-Rooter, it could unlock 10-20% value. Management has historically shown no interest in this, but it remains a latent catalyst.

---

#### Long-Term Catalysts (3-10 Years)

##### 9. Baby Boomer Mortality Wave

The demographic tailwind is just beginning. The oldest Baby Boomers (born 1946) are 79 in 2025; the youngest (born 1964) are 61. Annual US deaths are projected to increase by ~30-40% by 2040. VITAS, as the largest hospice provider, is positioned to benefit disproportionately from this secular trend. This is the biggest long-term catalyst — simply the arithmetic of population aging.

##### 10. Hospice Utilization Rate Expansion

~48% of Medicare decedents still do not use hospice. This is a massive untapped market. As physician attitudes evolve, as cultural acceptance of palliative care grows, and as family caregivers increasingly advocate for hospice, the utilization rate should continue rising from ~52% toward 65-70%.

---

#### Bull Case

- VITAS ADC accelerates to 8-10% annual growth through 2027 as Baby Boomer mortality wave intensifies and hospice utilization rate expands; CMS rates increase 3-4%/year; combined VITAS revenue grows 11-14% annually, driving EBIT margin expansion to 15%+ as operating leverage compounds
- Roto-Rooter returns to 3-5% annual revenue growth as housing market normalizes post-rate-cut cycle; operating margins hold above 25% through pricing discipline
- Management deploys $250M+/year in buybacks at 20-22x adjusted earnings; share count falls by 4-5%/year; adjusted EPS reaches $28-32 by FY2027

#### Bear Case

- CMS implements material hospice reimbursement cuts (e.g., restructuring GIP rates) or a new OIG investigation creates legal overhang, compressing VITAS operating margins to 8-9% and causing consensus estimate cuts of 15-20%
- Nursing labor shortage worsens materially, with wage inflation re-accelerating to 7-8% while CMS rate increases remain 2-3%; VITAS margin compression is sustained over 2-3 years
- Roto-Rooter faces digital platform competition that accelerates market share losses; revenues decline 3-5% for multiple years while technician wage inflation persists; segment EBIT falls below $150M

## Full Research Available

This primer covers steps 1–3 of 19. The full deep dive (moat analysis, DCF, bull/bear,
management quality, earnings transcript analysis) is available via:

- Investment memo: /memo/che
- Full research API: GET /api/v1/research/CHE/memo
- Coverage universe: /stocks