Chemed Corp (CHE)CHE

Chemed Corp.: Comprehensive Analysis

Company Profile:

• History: Founded in 1971 as a provider of durable medical equipment (DME), Chemed Corp has evolved through acquisitions to encompass three main segments:
  • VITAS Healthcare: Provides hospice care, palliative care, home care, and personal care.
  • Golden Living: Operates skilled nursing facilities, transitional care units, assisted living and retirement centers, and homecare.
  • Roto-Rooter: One of the world's largest plumbing service companies.
• Core Business Areas:
  • VITAS: The nation’s leading provider of at-home healthcare and hospice services, serving approximately 190,000 patients per day across 49 states and the District of Columbia with the largest market share of 18.2%.
  • Golden Living: With 205 locations, Golden Living is focused on improving quality of life through their post-acute services.
  • Roto-Rooter enjoys the top market position with 40% market share, providing plumbing and other related services through a network of 438 franchises and nine company-operated locations in the U.S. and Canada.
• Leadership: The CEO and Chairman is Phillip A. Norcross. The CFO is Michael J. Vivirito.
• Corporate Structure: Chemed is organized into three independent business segments (VITAS Healthcare, Golden Living, Roto-Rooter), with each having their own leadership and operating independently.

Top Products and Market Share:

VITAS Healthcare:

• Provides hospice and palliative care services, including pain and symptom management, emotional and spiritual support.
• Market Share: Approximately 567,500 patients in fiscal 2023, 18.3% share of hospice market.

Golden Living:

• Offers rehabilitation, skilled nursing care, home care and assisted living services.
• Revenue sources: Medicare and Medicaid.
• Market share: approximately 2.4% share of post-acute care market serving ~255 locations across 38 states and D.C.

Roto-Rooter:

• Offers residential and commercial plumbing, drain and sewer cleaning services, with an established network and strong brand recognition.
• Market Share: 40% in US market, and 250,000 franchises worldwide.

Total Addressable Market:

• Hospice Care: $25 Billion in US
• Post-acute care services: $250 billion in US.
• Home improvement construction services: 275 Billion in the U.S., 1.2 Trillion globally (2018 stats)

Financial Performance:

Chemed's performance has fluctuated throughout 2021- Aug. 2023:

• Revenue peaked at 4.2 Billion in Q3-21 but declined to $3.8 billion by Aug 23, with the decline primarily attributed to lower revenue in its Golden living segment.
• Net income reached its highest at $225.9 Million in Q2- 22 but fell to -$100 in Q2 2023 due to losses in Golden Living.
• Profit margin remained negative in Q2- 2023 but experienced positive years in 2021-22.

Earnings per share (EPS): High was $3.93 in Q3 20.22.

• Cash Flow Statements: Recent decrease mainly caused by Golden Living's performance. Balance sheet: Stable, but total assets have declined from 2022.

Dividend and Shareholder Returns:

• Dividend Yield: 0.95% in Sept. 2023.
• Payout ratio fluctuated from -26.24% in Q2- 2023 to a positive payout of 32.29% Q1 2023.
• Total Shareholder return for past year is -4.25%.
• 5 year return is 227.4%.

Growth Trajectory:

• VITAS and Roto-Rooter show consistent revenue growth over past 5-10 years, while Golden Living is variable.
• Future projections uncertain due to various economic factors and Golden living performance, despite positive trends for Vitas and Roto-Rooter.

Market Dynamics:

• Hospice care: Increasing US aging population, rising cost of traditional care drive growth.
• Skilled Nursing: Policy shifts, reimbursement uncertainties affect industry.
• Plumbing: Growing urbanization, rising housing demand necessitate services.
• Chemed's position: Strong market positions in Vitas and Roto-Rooter offer stability, however, the challenges in Golden Living require strategic adjustments.

Key Competitors:

• Hospice: Amedisys Inc. (AMED) - 12.2% market share, LHC Group Inc (LHCG)- 8.5% share.
• Post-Acute Care: Genesis HealthCare (GEN)- 2.2%
• Plumbing: ServiceMaster Global Holdings Inc. (SERV) -23% market share.

Recent Acquisitions (2020-23): None.

**AI-Based Fundamental Rating: 7.5 / 10 **

Justification:

• Strengths include strong brands and market positions in VITAS and Roto-Rooter, steady revenue growth in these segments, and consistent dividend payments.
• Challenges are attributed to Golden Living's performance and its potential impact on overall financials, as well as the need for strategic adaptations to the changing healthcare landscape.

Sources and Disclaimers:**

• Chemed Corp Website: https://www.chemed.com/investing
• SEC Filings: https://www.sec.gov/edgar/search/#/
• Analysts Reports: Zacks Investment Research, Seeking Alpha

Disclaimer: This information is for general knowledge, not financial advice. Always conduct your own research and consult a financial advisor before investment decisions.

Please note, this is a brief overview. Further research is required for detailed information.