“Chemed Corp. (CHE) operates two unrelated but attractive businesses. The company owns VITAS Healthcare, the largest U.S. provider of end-of-life care, with 52 hospice programs covering some 14,000 patients. Chemed also operates Roto-Rooter, the nation’s largest provider of plumbing services, with an estimated 15% share of the drain-cleaning market. The stock earns an Overall Quadrix score of 96, keyed by solid scores for Momentum (75), Value (77), and Quality (89).
“June-quarter earnings per share were $1.26, up 16% and in line with the consensus. Revenue increased 6%. Management targets 2012 per-share earnings of $5.35 to $5.50, up at least 12% and bracketing the consensus of $5.42. Increased operating efficiency and new franchises should drive results at Roto-Rooter, while acquisitions and favorable reimbursement rates should boost VITAS. Chemed, capable of climbing 15% to 20% over the next 12 months, is being initiated as a Buy.”
- Richard J. Moroney, CFA, Upside, August 6, 2012