Chemed Corporation (CHE): BCG Matrix [Dec-2025 Updated]

You're looking at Chemed Corporation (CHE) and seeing a portfolio split right down the middle between hospice and plumbing, and the 2025 data makes the strategic path clear. VITAS Healthcare is definitely the Star, fueled by an aging population and projected revenue growth between 7.5% and 8.5%, while the stalwart Roto-Rooter functions as the Cash Cow, delivering a strong 22.7% Adjusted EBITDA margin on low 1.25% to 1.75% growth. But the real story lies in the Dogs-stagnant plumbing lines seeing declines like 5.8% in residential drain cleaning-and the Question Marks, including high-growth water restoration and the $28.2$ million Medicare Cap challenge, so let's map out where Chemed Corporation needs to invest or divest next.

Background of Chemed Corporation (CHE)

You're looking at Chemed Corporation (CHE), a company that presents a unique portfolio, operating through two wholly owned subsidiaries: VITAS Healthcare Corporation, which is the nation's largest provider of end-of-life care, and Roto-Rooter, the leading commercial and residential plumbing and drain cleaning service provider in North America. Honestly, it's a strange but defintely profitable mix that you need to understand before mapping its portfolio. For the trailing twelve months (TTM) ending September 30, 2025, Chemed Corporation posted total revenue of an impressive $2.53 billion, showing a 6.45% year-over-year increase.

When you look at the third-quarter 2025 results, you see a clear divergence in performance, which is key to any strategic analysis. For the quarter ended September 30, 2025, Chemed reported consolidated revenue of $624.9 million, which was a 3.1% increase from the prior year. However, profitability metrics were under pressure; GAAP Diluted Earnings-per-Share (EPS) actually fell by 10.8% to $4.46. On the balance sheet side, the company remains rock solid, exiting Q3 2025 with $129.8 million in cash and cash equivalents and carrying no current or long-term debt.

The VITAS segment, being the hospice care arm, was the primary driver of top-line growth in the recent period. For Q3 2025, VITAS net patient revenue grew 4.2% to $407.7 million, supported by a 2.5% rise in its Average Daily Census (ADC) and a 5.6% increase in admissions. Management noted that a geographically weighted average Medicare reimbursement rate increase of approximately 4.1% helped boost revenue. Still, despite this revenue growth, the segment faced headwinds from acuity mix shifts and Medicare caps, leading to a 9.0% decrease in net income for the quarter.

Roto-Rooter, the home services side, showed more modest top-line movement but significant margin compression. In Q3 2025, Roto-Rooter revenue increased by only 1.1% to $217.2 million. This small revenue gain masked operational difficulties, as its Net Income decreased by 14.8%, and its Adjusted EBITDA fell by 12.4% to $49.4 million. The Adjusted EBITDA margin for Roto-Rooter contracted by 351-basis points to 22.7%, largely due to rising labor and insurance costs impacting the plumbing and drain cleaning services.

Chemed Corporation (CHE) - BCG Matrix: Stars

The Star quadrant in the Boston Consulting Group Matrix is reserved for business units exhibiting high market share in a high-growth market. For Chemed Corporation, this position is clearly occupied by VITAS Healthcare, which serves as the primary growth engine for the enterprise.

VITAS Healthcare is positioned as the nation's largest provider of end-of-life care, indicating a dominant market share position in a sector benefiting from secular tailwinds, specifically the aging US population. The segment's growth trajectory is robust, with management estimating that full-year 2025 revenue, prior to Medicare Cap considerations, will increase between 7.5% and 8.5% when compared to 2024 figures.

The strength of this segment is evident in the first quarter of 2025 results. Net Patient Revenue reached $407.4 million, marking a significant year-over-year increase of 15.1%. This high growth rate consumes cash but solidifies market leadership, which is the hallmark of a Star. The growth was fueled by operational expansion and favorable pricing dynamics.

Here's a look at the key operational metrics driving the high growth for VITAS Healthcare in Q1 2025:

• Average Daily Census (ADC) was 22,244, representing a 13.1% increase.
• Admissions totaled 18,139, up 7.3% year-over-year.
• The acquisition of Covenant Health hospice assets, completed in April 2024 for $85.0 million, contributed approximately $11.5 million to $12.5 million in Q1 2025 revenue.

The revenue growth in Q1 2025 was comprised primarily of a 11.9% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 3.2%. To be fair, the high growth rate means cash consumption is high, but the segment is generating substantial operating income before accounting for Medicare Cap limitations.

The profitability metrics, excluding the Medicare Cap impact, show the underlying strength of the core business:

Even looking at the third quarter of 2025, where year-over-year growth moderated, VITAS Net Patient Revenue was $407.7 million, up 4.2%, driven by a 2.5% increase in days-of-care and a Medicare reimbursement rate increase of approximately 4.1%. This sustained growth, despite headwinds like acuity mix shifts and Medicare Cap billing limitations totaling $6.1 million accrued in Q3 2025, confirms its Star status for now.

The strategy for a Star like VITAS Healthcare is to continue investing to maintain market share, as success here is what eventually converts the unit into a Cash Cow when the market growth slows. Chemed Corporation's capital allocation strategy, including share repurchases of 50,000 shares for $29.8 million in Q1 2025, is supported by the strong cash generation from this segment.

Chemed Corporation (CHE) - BCG Matrix: Cash Cows

The Roto-Rooter segment of Chemed Corporation fits squarely into the Cash Cow quadrant. This business unit is the established market leader in commercial and residential plumbing and drain cleaning services across the nation. High market share in a mature industry means it requires less investment in aggressive market development, allowing it to generate substantial, reliable cash flow.

This segment demonstrates high profitability, evidenced by its Adjusted EBITDA margin of 22.7% in the third quarter of 2025. This margin, while slightly below the long-term target range of 25% to 26%, still represents significant cash generation capability for Chemed Corporation. The segment's Adjusted EBITDA for Q3 2025 was $49.4 million.

The market growth rate for Roto-Rooter is characteristic of a mature business. The full-year 2025 revenue growth for Roto-Rooter is forecasted to be a modest 1.25% to 1.75% compared to 2024. This low growth profile is what allows the segment to be a net cash provider rather than a cash consumer for expansion.

Here's a quick look at the key financial metrics for the Roto-Rooter segment as of the latest reported quarter:

The cash generated by Roto-Rooter is crucial for the overall corporate structure. It helps fund the higher-growth, but currently less profitable, VITAS segment, which posted an Adjusted EBITDA (excluding Medicare Cap) of $70.4 million in Q3 2025. Furthermore, this segment's reliable cash flow supports shareholder returns. For instance, Chemed Corporation repurchased 50,000 shares of its stock for $29.8 million during the first quarter of 2025, demonstrating the use of internally generated cash for capital return programs.

You should view Roto-Rooter as the engine that keeps the corporate machinery running smoothly. Its role is to maintain productivity and passively deliver gains, which supports the company's strategic flexibility. Key actions for this segment focus on efficiency rather than market penetration:

• Maintain current infrastructure to support existing service levels.
• Implement operational controls to lift EBITDA margins toward the 25% target.
• Use cash flow to fund strategic acquisitions of franchises.
• Support corporate administrative costs and debt servicing.

As of September 30, 2025, Chemed Corporation reported total cash and cash equivalents of $129.8 million and maintained no current or long-term debt, a testament to the strength of its cash-generating units like Roto-Rooter.

Chemed Corporation (CHE) - BCG Matrix: Dogs

You're looking at the parts of Chemed Corporation's Roto-Rooter segment that are stuck in low-growth or declining markets, which is what we call the Dogs quadrant. These aren't the growth engines; they're units where market share is low, and the market itself isn't expanding much, if at all. Honestly, these areas often tie up capital without much return.

Here's a look at the specific service lines within Roto-Rooter that fit this profile based on the second quarter of 2025 performance:

The specific revenue trends for these lower-performing residential services in Q2 2025 were stark:

• Roto-Rooter's residential drain cleaning service line saw a decline of 5.8% in residential revenue.
• Revenue from Roto-Rooter's independent contractors declined by 4.4% in Q2 2025.
• Core plumbing services within Roto-Rooter residential experienced a slight decline of 1.1%.

These stagnant or declining services are definitely facing margin pressure, and you can see it in the segment's profitability metrics. The Roto-Rooter segment's Adjusted EBITDA margin for Q2 2025 landed at 21.8%, which was a significant drop of 517-basis points compared to the same period in 2024. To be fair, the gross margin for the segment was 49.0% in Q2 2025, but the overall margin compression points directly to those higher labor and insurance costs you mentioned, which are eating into the returns from these lower-growth areas. Even by the third quarter of 2025, the Adjusted EBITDA margin was only 22.7%, still well below prior year levels.

Chemed Corporation (CHE) - BCG Matrix: Question Marks

These business units operate in high-growth markets but currently hold a low market share, demanding significant cash investment to capture that growth potential. For Chemed Corporation (CHE), these areas represent strategic bets that must quickly gain traction or risk becoming Dogs.

The primary Question Marks center around aggressive expansion in the VITAS segment and the high-growth, but cash-intensive, development of specific service lines within Roto-Rooter.

VITAS Geographic Expansion and Regulatory Headwinds

VITAS Healthcare is actively pursuing expansion, which requires heavy upfront capital to establish market share against existing local hospice providers. The company operates $\text{55$ hospice programs across $\text{16$ states and the District of Columbia, targeting $\text{7-8% of the total U.S. hospice market share. Strategic investment is ongoing, with new operations set to launch in Marion County, Florida, in mid-May 2025, and a Certificate of Need (CON) secured for Pinellas County, Florida.

This growth strategy is simultaneously challenged by regulatory constraints, specifically the Medicare Cap billing limitations, which Chemed Corporation is currently estimating at a total of $\text{$28.2 million$ for calendar 2025. This total limitation is comprised of $\text{$19 million$ related to the Florida combined program and $\text{$9.2 million$ for all other VITAS programs. The need to manage patient mix to mitigate this cap risk requires immediate, focused investment.

Key financial data points related to the hospice mix and reimbursement:

Roto-Rooter's High-Growth Service Sub-Segment

Within the Roto-Rooter segment, the residential water restoration service is exhibiting high-growth characteristics, fitting the Question Mark profile. This service is a clear area for heavy investment to quickly build market share, even as the overall segment faces margin pressure.

• Residential water restoration revenue increased by $\text{16.9% in the second quarter of 2025 compared to the prior-year period.
• Commercial water restoration revenue increased by $\text{11.7% in the second quarter of 2025.
• Despite these bright spots, Roto-Rooter's overall Adjusted EBITDA declined by $\text{18.7% to $\text{$48.6 million$ in Q2 2025.
• The segment's overall revenue growth in Q2 2025 was modest at $\text{0.6%, totaling $\text{$222.6 million$.

The company is supporting this growth area with excavation, which saw commercial revenue increase by $\text{24.4% in Q2 2025.

High-Acuity Care Focus

Chemed Corporation's focus on high-acuity hospice care represents a strategic choice to prioritize higher reimbursement rates, even though it currently represents a smaller portion of the total volume. In the first quarter of 2025, high acuity days-of-care accounted for only $\text{2.6% of total days of care. The higher reimbursement rate for this care is evident, averaging $\text{$1,121.07$ per day in Q1 2025, compared to $\text{$183.06$ for routine home care. By Q2 2025, the high-acuity rate increased further to $\text{$1,136.44$ per day. This mix shift, however, negatively impacted revenue growth by $\text{112-basis points$ in Q1 2025 when compared to the prior-year period's mix.