Oppenheimer says Chemed should be down significantly on Vitas Florida Cap impact

Oppenheimer analyst Michael Wiederhorn notes Chemed’s (CHE) Vitas expects to book an $18M-$25M Medicare cap liability in Florida for Cap Year 2025 due to weaker-than-expected admissions post-Q1, coupled with the previously discussed cap structural issues. With the benefit of new starts, Vitas is not expecting the cap issue to persist into 2026. Roto-Rooter also saw continued demand weakness in Q2, concentrated in residential. Post-announcement, the firm is lowering its FY25/2026/2027 EPS estimates to $22.97/$25.73/$27.44 from $25.23/$26.97/$28.78. The Florida issues are not going away in the near term and the stock should be down significantly on this miss in an unforgiving market, Oppenheimer says. However, this company wrote the playbook on avoiding cap, and historically pullbacks are an opportune time to establish long-term positions, argues the firm. Oppenheimer has an Outperform rating on Chemed with a price target of $650 on the shares.