Chemed shares target cut by RBC on Roto-Rooter headwinds By

On Tuesday, RBC Capital adjusted its price target for Chemed Corporation (NYSE: NYSE:) shares, a provider of hospice and plumbing services, to $697 from the previous target of $712, while retaining an Outperform rating on the stock.

The adjustment follows a review of the company’s performance in the first quarter of 2024 and takes into account both the solid results delivered by its VITAS Healthcare unit and the challenges faced by its Roto-Rooter business.

Chemed reported strong performance in its VITAS segment, which saw a robust patient census. RBC Capital expressed confidence in the continued strength of this segment, anticipating patient census growth to exceed the high end of management’s guidance. This optimism is partly based on the potential benefits stemming from the recent acquisition of Covenant Care.

Despite the positive outlook for VITAS, Chemed’s Roto-Rooter business experienced headwinds, with a revenue decrease of 5.8% year-over-year in the first quarter. This decline in the plumbing segment has prompted RBC Capital to revise its estimates, leading to the lowered price target.

The firm’s analyst highlighted the contrasting performance between the two segments of Chemed’s operations. While VITAS continues to show promising growth, the challenges within Roto-Rooter have necessitated a reassessment of the stock’s value.

Nonetheless, the Outperform rating suggests that RBC Capital still sees Chemed as a favorable investment opportunity despite the recent adjustments to its expectations.

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