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Investing.com -- Jefferies upgraded Chemed Corp to Buy from Hold, saying recent developments have reduced regulatory risk in its hospice business and improved the earnings outlook, while share repurchases should help drive stock gains.
The bank said it had previously been cautious on Chemed, citing the impact of Medicare reimbursement caps in Florida.
But mitigation measures and better-than-expected 2026 Medicare rates have eased those concerns, putting projected hospice growth and margins toward the higher end of forecasts.
Jefferies now sees 2026 earnings before interest, tax, depreciation and amortization at the upper end of Street estimates.
Chemed had warned in June that the Medicare cap could result in an $18 million to $25 million liability. Jefferies said current trends suggest the hit will be below $5 million as the company focuses on short-stay patients, hospitals, and new operations.
It expects VITAS Healthcare, Chemed’s hospice unit, to grow 6% to 8% in 2026 with margins of 17.5% to 18.5%, levels already reflected in consensus estimates.
Jefferies also pointed to aggressive buybacks, with management likely to use most of its $480 million authorization in the second half of 2025, supporting near-term valuation.
Roto-Rooter, Chemed’s plumbing and drain services business, remains a source of uncertainty, but Jefferies noted encouraging July trends and expects a solid August that could support third-quarter results.
It added that a Federal Reserve rate cut could help the unit by shifting contractor demand back to construction and renovation projects, easing competitive pressures.