8-K: Chemed Q4 Earnings Decline, Roto-Rooter Slumps

Chemed Corporation reported a 9% drop in GAAP diluted EPS for Q4 2025, with its Roto-Rooter segment experiencing a significant revenue and EBITDA decline, while VITAS showed modest revenue growth.

Summary

• Consolidated revenue for Q4 2025 was $639.3 million, essentially flat compared to Q4 2024.
• GAAP Diluted Earnings-per-Share (EPS) decreased by 9.0% to $5.48.
• Adjusted Diluted EPS decreased by 6.0% to $6.42.
• VITAS segment net patient revenue increased by 1.9% to $418.8 million, driven by a 1.3% increase in Average Daily Census (ADC) and a geographically weighted average Medicare reimbursement rate increase of approximately 2.2%.
• Roto-Rooter segment revenue decreased by 3.7% to $220.6 million, with Adjusted EBITDA declining by 21.1% to $47.5 million.
• The company repurchased 400,000 shares for $174.6 million during the quarter.
• Chemed ended Q4 2025 with $74.5 million in cash and no current or long-term debt.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report with significant declines in Roto-Rooter's performance and overall EPS, partially offset by positive trends in VITAS's core metrics and a strong balance sheet, but the forward guidance suggests a recovery.

Positives

• VITAS segment net patient revenue increased by 1.9% to $418.8 million.
• VITAS Average Daily Census (ADC) increased by 1.3% to 22,462.
• VITAS admissions increased by 6.0% to 17,419.
• Projected Medicare Cap billing limitations for VITAS are estimated to significantly decrease to $9.5 million in calendar 2026 from $27.2 million in calendar 2025.
• The company has a strong balance sheet with $74.5 million in cash and no current or long-term debt.
• Chemed repurchased 400,000 shares for $174.6 million in Q4 2025, indicating confidence in valuation.
• Undrawn borrowing capacity under the Credit Agreement is approximately $404.5 million.
• VITAS has successfully mitigated its Florida Medicare Cap issue, expecting a more favorable patient mix in 2026.

Negatives

• Consolidated GAAP Diluted EPS decreased by 9.0% to $5.48.
• Consolidated Adjusted Diluted EPS decreased by 6.0% to $6.42.
• Roto-Rooter segment revenue decreased by 3.7% to $220.6 million.
• Roto-Rooter Adjusted EBITDA declined significantly by 21.1% to $47.5 million.
• Roto-Rooter Adjusted EBITDA margin declined by 477-basis points to 21.5%.
• VITAS Adjusted EBITDA, excluding Medicare Cap, decreased by 1.7% to $91.6 million.
• VITAS Adjusted EBITDA margin, excluding Medicare Cap, decreased by 79-basis points to 21.7%.
• VITAS gross margin, excluding Medicare Cap, declined by 150-basis points to 27.3%.
• Roto-Rooter's water restoration revenue declined by 20.0% in commercial and 10.3% in residential.
• Cash and cash equivalents decreased from $178.35 million in 2024 to $74.5 million in 2025.

Risks

• The impact of laws and regulations on Chemed's operations, including Medicare Cap and Medicare reimbursement rates, poses a risk.
• Chemed's estimates of the effect of Medicare Cap on VITAS revenues and future prospects are subject to inherent uncertainties.
• Expectations regarding VITAS patient mix are forward-looking and subject to change.
• Expectations regarding demand for Roto-Rooter's services carry inherent uncertainties.
• Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of Chemed's control.

Future Outlook

For 2026, VITAS revenue (prior to Medicare Cap) is estimated to increase by 5.5% to 6.5%, with ADC growing 3.5% to 4.0%, and full-year EBITDA margin between 17.5% and 18.0%. Roto-Rooter is forecasted for 3.0% to 3.5% revenue growth and an adjusted EBITDA margin of 22.5% to 23.0%. Consolidated full-year 2026 adjusted diluted EPS is estimated to be in the range of $23.25 to $24.25, up from $21.55 in 2025, with earnings trajectory weighted towards the second half of the year.

Management Comments

• "We believe VITAS has successfully mitigated its Florida Medicare Cap issue."
• "As a result, in 2026, the patient mix should moderate to a more favorable balance of short and longer-stay patients."
• "However, the financial impact of admitting a higher number of potentially longer-stay patients does not come until roughly a fiscal quarter post-admission."
• "Roto-Rooter is projected to have elevated expenses in the first half of the year in order to fund revenue growth and long-term margin improvement projects currently underway."
• "Momentum is expected to build sequentially, quarter-to-quarter throughout the year."

Industry Context

StockSavvy.ai notes that the hospice care sector, represented by VITAS, continues to see demand, evidenced by increased ADC and admissions, despite some margin compression. The plumbing and drain cleaning industry, where Roto-Rooter operates, appears to be facing headwinds, particularly in water restoration, which could reflect broader economic slowdowns impacting discretionary home and commercial services. The significant reduction in projected Medicare Cap billing limitations for VITAS is a positive development, potentially easing regulatory pressures that have historically impacted hospice providers.

Legal Proceedings

• The reconciliation of adjusted net income includes 'Legal settlements' of $221 thousand for Q4 2025 and $3.071 million for the full year 2025, indicating ongoing or resolved legal matters.

Stakeholder Impact

• Shareholders are impacted by declining EPS in Q4 2025, but may benefit from ongoing share repurchases and positive 2026 EPS guidance.
• Employees in the VITAS segment may experience stable employment due to continued demand for services, evidenced by increased ADC and admissions.
• Employees in the Roto-Rooter segment might see operational adjustments due to revenue decline and elevated expenses in H1 2026, though funding for growth projects could be positive long-term.
• Customers of VITAS will continue to have access to end-of-life care services, with increased capacity indicated by higher ADC and admissions.
• Customers of Roto-Rooter may experience changes in service availability or pricing, particularly in water restoration services which saw a decline in demand.
• Creditors face low risk due to the company's strong balance sheet, reporting no current or long-term debt and significant undrawn credit facility capacity.

Next Steps

• Management will provide more detail during a conference call and webcast on February 26, 2026, at 10 a.m. ET.
• Roto-Rooter will continue with elevated expenses in the first half of 2026 to fund revenue growth and long-term margin improvement projects.
• The company expects momentum to build sequentially, quarter-to-quarter, throughout 2026.

Key Dates

Recommendation

While Chemed's Q4 2025 results show a decline in consolidated EPS and a significant slump in the Roto-Rooter segment, the VITAS segment demonstrates underlying strength in patient metrics and a favorable outlook regarding Medicare Cap limitations. The company's strong balance sheet with no debt and ongoing share repurchases are positive. However, the Roto-Rooter segment's struggles and the H1 2026 expense projections introduce near-term uncertainty. The 2026 guidance for improved EPS is promising but relies on a second-half recovery and successful execution of growth initiatives. A 'hold' recommendation is appropriate as investors await clearer signs of Roto-Rooter's turnaround and the realization of VITAS's improved patient mix benefits.

Keywords

Chemed Corporation, CHE, Q4 2025 Earnings, Financial Results, VITAS Healthcare, Roto-Rooter, Hospice Care, Plumbing Services, Drain Cleaning, Medicare Cap, EPS, EBITDA, Revenue, Share Repurchase, Healthcare, Home Services