Chemed Earnings Call: VITAS Leads, Roto-Rooter Lags

Chemed ((CHE)) has held its Q1 earnings call. Read on for the main highlights of the call.

Chemed’s latest earnings call painted a generally upbeat picture, with hospice unit VITAS powering stronger results and a higher outlook while plumbing and restoration arm Roto-Rooter wrestled with margin pressure. Management emphasized that VITAS’ admissions growth, margin resilience and improved Florida cap position more than offset Roto-Rooter’s marketing, weather and pricing headwinds.

VITAS Admissions Momentum and ADC Upgrade

VITAS reported 19,394 admissions in the first quarter of 2026, a 6.9% increase from the prior year, underscoring solid demand for its hospice services. Average daily census rose 2.2% to 22,723, and management’s confidence was evident as they raised full-year ADC growth guidance to a 4.5%–5.5% range from 3.5%–4%.

Revenue Growth and Margin Stability at VITAS

Net revenue at VITAS reached $420 million, up 3.1% year over year, as average revenue per day climbed to $210.62, an improvement of 146 basis points. Adjusted EBITDA excluding Medicare cap came in at $70.8 million, edging up 0.6% and supporting a 16.8% adjusted EBITDA margin despite mix headwinds and regulatory costs.

Florida Cap Cushion Strengthens Financial Flexibility

VITAS added more than $32.5 million to its cap cushion in the Florida combined program during the quarter, reinforcing its regulatory and financial buffer in a key market. Management said the prior 2025 Florida cap issue is now behind the company and that no cap limitation is expected in fiscal 2026, reducing a major uncertainty overhang.

Higher Company-Wide Guidance and Earnings Power

Chemed raised its company-wide revenue growth outlook excluding Medicare cap to 6.5%–7.5% from 5.5%–6.5%, reflecting VITAS’ momentum and steady expectations at Roto-Rooter. The firm also boosted its adjusted EBITDA margin guidance ex-cap to 18.0%–18.5% and now projects full-year adjusted EPS between $20.00 and $24.75, implying double-digit earnings growth at the midpoint.

Roto-Rooter Shows Early Recovery in Residential Core

For the first time since late 2022, Roto-Rooter posted gains in both residential plumbing and residential sewer and drain revenue, a key step toward stabilizing its core business. Total leads rose 3.3% year over year while paid leads jumped 18.7%, with paid leads now making up 53.4% of total leads versus 46.5% a year earlier.

Operational Gains and Accretive Franchise Buybacks

Centralizing water restoration billing and collections reduced write-offs by $1.5 million compared with the first quarter of 2025, signaling operational improvement in a historically messy area. Chemed also repurchased franchise territories in San Francisco and Fort Worth for about $20.6 million, expecting these deals to add $5.0–$5.5 million of revenue this year and to be immediately accretive to earnings.

Roto-Rooter Revenue Softness and Margin Compression

Despite residential green shoots, Roto-Rooter’s branch commercial revenue fell 1.9% to $56.5 million and branch residential revenue slipped 1.5% to $16.3 million. Adjusted EBITDA declined 9.6% to $53.5 million, and the segment’s adjusted EBITDA margin contracted by 218 basis points to 22.5%, highlighting ongoing profitability pressure.

Higher Marketing Spend Weighs on Profitability

The mix shift toward paid leads required a step-up in advertising and marketing, adding roughly $3 million of expense versus the prior-year quarter. Management expects elevated marketing costs to persist and trimmed Roto-Rooter’s full-year adjusted EBITDA margin guidance to 21.5%–22.5% from 22.5%–23%, signaling a deliberate trade-off between growth and near-term margins.

Weather Disruptions Drag on Top-Line Performance

Unusual ice and snow storms disrupted service across about 24 Roto-Rooter branches, limiting crews’ ability to reach customers and complete jobs. Management estimated these weather events led to net lost revenue of $3–$4 million in the quarter, compounding the impact of softer demand and higher marketing spend.

Water Restoration Pricing and Mix Under Pressure

The ongoing transition to centralized billing coincided with a roughly 13% drop in average revenue per water restoration job in the first quarter of 2026. Revenue from independent contractors fell 3.3% year over year and overall pricing and mix in water restoration remain below expectations, underscoring the need for further refinement in this higher-margin niche.

Acuity Mix, Medicare Cap and Revenue Headwinds at VITAS

VITAS’ revenue growth was dampened by an unfavorable shift in acuity mix, which reduced growth by about 120 basis points, while Medicare cap and contra revenue changes shaved another 47 basis points. The company accrued $2.4 million in Medicare cap billing limitations during the quarter, reminding investors that regulatory constraints can still impact reported revenue.

Shorter Length of Stay Alters Revenue Dynamics

Average length of stay at VITAS fell to 102.7 days from 118.7 days, a drop of 16 days or roughly 13.5%, while median length of stay slipped to 15 days, reflecting a tilt toward shorter-stay patients. This change can pressure revenue per admission and mix, but it also signals increasing penetration among later-stage patients who may have been previously underserved.

Outlook and Guidance Signal Confidence Amid Execution Risk

Chemed’s refreshed 2026 guidance leans constructive, with higher expectations for ADC growth, revenue and consolidated margins driven by VITAS’ early-year outperformance. While Roto-Rooter’s revenue growth outlook is steady at 3.0%–3.5% and its margin guide is lower due to marketing and operational challenges, management still targets adjusted diluted EPS of $20.00–$24.75 under assumptions of a stable tax rate and share count.

Chemed’s earnings call ultimately balanced optimism with realism, spotlighting VITAS as the main engine of growth while acknowledging that Roto-Rooter remains a work in progress. For investors, the raised guidance and improved regulatory footing at VITAS provide a stronger foundation for 2026, but the path to margin recovery at Roto-Rooter will be a critical swing factor for the stock’s performance.