Healthcare services company Chemed Corporation (NYSE: CHE) reported Q1 CY2026 results topping the market’s revenue expectations, with sales up 1.6% year on year to $657.5 million. Its non-GAAP profit of $5.65 per share was 6.6% above analysts’ consensus estimates.

Is now the time to buy CHE? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Chemed’s first quarter results were well received by the market, reflecting stronger-than-expected performance at its VITAS hospice business and early signs of stabilization at Roto-Rooter. Management attributed the quarter’s outperformance to accelerated admissions at VITAS, achieved through a deliberate push to increase both hospital and non-hospital referrals while maintaining lower-than-budgeted labor costs. CEO Kevin McNamara noted, “VITAS management was able to add ADC through accelerated admissions from nonhospital preadmission locations while also maintaining a high level of hospital-based emissions.” Meanwhile, the Roto-Rooter segment saw core residential revenues grow for the first time since late 2022, despite weather-related disruptions and increased marketing spend to offset declining organic search leads.

Looking forward, Chemed’s guidance is shaped by optimism around sustained VITAS growth and a pragmatic approach to Roto-Rooter’s evolving cost structure. Management is prioritizing the expansion of staff at VITAS to support higher average daily census, with CFO Mike Witzeman stating, “We feel very good that if we add those 60 [FTEs per month], we can achieve the level of ADC growth we have currently budgeted and maybe a little better than that.” At Roto-Rooter, ongoing higher marketing costs are expected as the business works to regain organic search visibility, with CEO McNamara cautioning that “in order to keep our business where it is and basically, our sales where we budgeted, we’ve got to pay for more of the leads, and that means more marketing costs.” Chemed is also closely monitoring regulatory developments in hospice, especially in key markets like California and Florida.

Key Insights from Management’s Remarks

Management highlighted strong patient admissions at VITAS and Roto-Rooter’s navigation of digital marketing challenges as pivotal to the quarter’s performance. Segment-specific headwinds and targeted operational responses shaped results across both businesses.

• VITAS admissions momentum: VITAS achieved a 6.9% increase in admissions, attributed to both hospital-based and non-hospital referral growth. The company balanced its patient mix to improve average daily census and minimize the impact of Medicare Cap limitations, particularly in Florida.
• Labor cost leverage at VITAS: Management operated with approximately 100 fewer full-time equivalents (FTEs) than budgeted, enabling higher profitability without sacrificing care quality. However, leadership indicated that staffing levels will increase through the year to match rising patient demand.
• Roto-Rooter marketing cost escalation: Increasing reliance on paid advertising due to changes in Google’s algorithm led to a $3 million jump in marketing costs versus last year. This offset gains in paid lead generation but pressured EBITDA margins.
• Weather-related disruptions: Roto-Rooter lost an estimated $3 million to $4 million in revenue due to service interruptions from widespread ice and snow storms in 24 branches, underlining the segment’s sensitivity to weather events.
• Strategic franchise acquisitions: Roto-Rooter acquired territories in San Francisco and Fort Worth for $20.6 million. While immediately accretive to earnings, these new locations initially carry lower margins and require operational integration to reach segment averages.

Drivers of Future Performance

Chemed’s outlook for the rest of the year hinges on sustaining VITAS growth, managing Roto-Rooter’s marketing costs, and adapting to regulatory changes.

• VITAS staffing and expansion: Management plans to ramp up hiring by adding around 60 new FTEs per month to support higher patient volumes, aiming to maintain efficient care delivery and capitalize on rising admissions in both existing and newly entered Florida counties.
• Roto-Rooter’s marketing adaptation: The business expects continued elevated marketing costs stemming from digital search algorithm changes, with no near-term relief anticipated. Leadership is investing in organic search improvement but cautions that paid leads will remain the primary growth lever for now.
• Regulatory and reimbursement risks: VITAS is closely monitoring proposed changes by the Centers for Medicare & Medicaid Services (CMS), particularly regarding hospice fraud enforcement and new wage rules. Management is supportive of anti-fraud initiatives but remains vigilant to ensure legitimate providers are not adversely impacted.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) whether VITAS can sustain its strong admissions growth and successfully scale operations in new Florida markets, (2) Roto-Rooter’s ability to manage elevated marketing costs while improving organic lead generation, and (3) the impact of regulatory developments in hospice, particularly any CMS rule changes or fraud enforcement actions. Execution on franchise integration and digital marketing strategies will be additional signposts for Chemed’s operational resilience.

Chemed currently trades at $423.18, up from $382.97 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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