Investing.com -- Chemed Corp (NYSE:CHE) shares jumped 8.7% in Wednesday trade after Jefferies upgraded the healthcare and maintenance conglomerate to Buy from Hold, arguing that the company is poised to regain its premium valuation as operating volatility recedes. Analyst Brian Tanquilut raised his price target by $100 to $620, predicting the stock will gradually re-rate toward 15 times EBITDA as management re-establishes a dependable track record of stable earnings growth.
According to Tanquilut, Chemed historically traded as a defensive, safe-haven "compounder" favored as a core holding by institutional funds before recent operational bottlenecks impaired earnings visibility. That dynamic is now shifting in the wake of the company's third-quarter report, which Jefferies viewed as definitive evidence that the firm's core earnings engine is accelerating while plumbing-related downside risks have abated.
At the center of Tanquilut's bullish stance is the VITAS hospice division, which he highlighted as expanding at a high-single to low-double-digit pace alongside widening operating margins. Chemed's quarterly figures reinforced that view, with VITAS generating a 12.2% rise in net patient revenue to $457.4 million on strong census growth, while adjusted EBITDA surged 31.4% to $92.5 million as margins expanded 318 basis points to 20.2%.
Crucially for institutional investors, the analyst pointed out that VITAS continues to run with a "healthy cap cushion," removing a critical overhang that historically clouded hospice sector sentiment. The underlying report showed VITAS accrued just $828,000 in Medicare Cap billing limitations for the quarter compared to $6.1 million a year ago, with 21 of its 33 provider numbers tracking a full-year cushion of 10% or higher and zero cap liability projected for its Florida program.
Meanwhile, Tanquilut noted that Roto-Rooter has reached an operational "stabilization point" and is no longer a source of earnings drag or volatility for the broader business. While division adjusted EBITDA dipped 2.5% to $48.2 million under higher overhead, commercial and residential demand remained resilient, lifting segment sales 7.5% to $233.5 million.
The analyst also pointed to untapped upside from franchise re-acquisitions as an incremental growth driver that should support valuation expansion over the coming quarters. During the period, Chemed invested roughly $62.5 million to reclaim key California territories covering a population of over 12 million, adding corporate branches in Sacramento and San Diego that will feed directly into owned branch margins.
These operational crosscurrents fed directly into Chemed's third-quarter beat, where adjusted diluted earnings per share of $6.75 outpaced consensus estimates of $6.44 on revenue of $690.9 million. With management guiding full-year results toward or slightly above the high end of previous expectations, Tanquilut indicated the stage is set for an earnings beat in the fourth quarter and into fiscal 2026.
Original Article
Jefferies upgrades Chemed to Buy, sees compounder multiple returning on Q3 beat
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