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Chemed Corp (CHE) Q1 2024 Earnings: Mixed Results Amidst Segment Variances


  • Reported Revenue: $589.23M, up by 5.2% year-over-year, slightly below estimates of $591.46M.

  • Net Income: $65.02M, up 20.1% from the previous year, surpassing estimates of $83.33M.

  • Earnings Per Share (EPS): Reported at $4.24, below the estimated $5.48.

  • VITAS Segment: Revenue increased by 14.0% to $354.0M, driven by an 11.5% increase in days-of-care and a 2.6% rise in Medicare reimbursement rates.

  • Roto-Rooter Segment: Revenue declined by 5.8% to $235.2M, with commercial revenue down 10.5% and residential revenue down 3.5%.

  • Consolidated Gross Margin: Improved in the VITAS segment to 23.7% from 19.0% year-over-year, while Roto-Rooter’s gross margin declined by 126 basis points to 51.9%.

  • 2024 Guidance: Full-year EPS forecast reiterated at $23.30 to $23.70, excluding certain non-cash and one-time items.

On April 24, 2024, Chemed Corp (NYSE:CHE) disclosed its first-quarter financial results through its 8-K filing. The company, known for its VITAS Healthcare and Roto-Rooter segments, reported a mixed financial performance with significant disparities between its two primary operations.

Company Overview

Chemed Corp operates through two main segments: VITAS, which provides hospice and palliative care, and Roto-Rooter, offering plumbing and drain cleaning services. VITAS is the larger segment, heavily reliant on Medicare and Medicaid reimbursement programs. Roto-Rooter serves both residential and commercial customers across the U.S., contributing robustly to Chemed’s revenue.

Financial Performance Highlights

The company’s consolidated revenue for the quarter stood at $589.23 million, aligning closely with analyst estimates of $591.46 million. This figure represents an increase from the $560.16 million reported in the same quarter the previous year. The net income for Q1 2024 reached $65.02 million, translating to earnings per share (EPS) of $4.24, which falls short of the estimated $5.48 EPS.

Segment Analysis

The VITAS segment saw a revenue increase of 14.0% to $354.0 million, driven by an 11.5% rise in days-of-care and a 2.6% increase in Medicare reimbursement rates. However, a shift in acuity mix slightly dampened this growth. Remarkably, the segment’s adjusted EBITDA surged by 67.2%, reflecting a robust margin expansion primarily due to the discontinuation of a pandemic-related expense program.

Conversely, the Roto-Rooter segment experienced a revenue decline of 5.8% to $235.2 million, attributed to decreases across most service categories, particularly in commercial revenue. The segment’s adjusted EBITDA decreased by 15.6%, with margins contracting by 299 basis points, indicating operational challenges.

Balance Sheet and Cash Flow

As of March 31, 2024, Chemed reported a strong balance sheet with $313.4 million in cash and cash equivalents and no significant debt, showcasing a solid financial position. The company also highlighted a strategic acquisition in the hospice sector, potentially bolstering its market footprint.

Operational Challenges and Outlook

While VITAS shows promising growth, Roto-Rooter’s downturn poses concerns about its market dynamics and competitive positioning. Chemed’s management has reiterated its full-year 2024 EPS guidance of $23.30 to $23.70, reflecting cautious optimism about overcoming current challenges.

Investor Considerations

Investors should note the contrasting performances of Chemed’s segments and consider the implications of the healthcare segment’s reliance on government reimbursement programs. The company’s strong financial health, evidenced by significant cash reserves and strategic acquisitions, provides a buffer against operational headwinds.

Chemed plans to update its 2024 earnings guidance in its next quarterly release, which will be crucial for investors assessing the company’s trajectory amid evolving market conditions.

For a deeper dive into Chemed’s financial details and future prospects, visit the GuruFocus.com.

Explore the complete 8-K earnings release (here) from Chemed Corp for further details.

This article first appeared on GuruFocus.



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