Jefferies upgrades Chemed to buy, raises target on earnings recovery outlook

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Jefferies upgrades Chemed

Highlights

Jefferies upgraded Chemed to buy from hold and raised its price target to $620 from $520, implying 22% upside after strong Q3 results.
Chemed shares gained over 2% premarket after Q3 beat expectations, with potential for premium valuation recovery if Q4 and FY2026 outperform guidance.
Chemed, up 16% in the past year, has resolved Medicare hospice cap issues and stabilized Roto-Rooter revenue, supporting more predictable earnings growth.

Broker upgrade follows stronger quarterly performance

As reported by CNBC, citing Jefferies, the investment bank upgraded Chemed to buy from hold and raised its price target to $620 from $520, implying about 22% upside from Monday's close. The change comes after the company posts third-quarter results that beat analyst expectations, helping lift the shares more than 2% in premarket trading.

Analyst Brian Tanquilut says investors have historically viewed Chemed as a defensive compounder that commanded a premium valuation and held a core place in many funds. He says that as the company emerges from recent operating issues that hurt earnings visibility, stability and growth, the stock can recover its premium multiple, particularly if fourth-quarter and fiscal 2026 results beat guidance.

Hospice and plumbing units show signs of stabilization

Chemed has risen about 16% over the past year, outperforming the broader market but trailing the S&P 500 healthcare sector, which is up 23% over the same period. The weaker relative performance partly reflects Medicare hospice caps that limit its client base and income potential in 2025.

Tanquilut says Chemed has fully moved through its Medicare cap issues, while its Roto-Rooter plumbing business is also showing signs of getting past earlier challenges. He says revenue at Roto-Rooter is stabilizing and that the impact of higher marketing spending is now being absorbed into long-term expectations, supporting a return to more predictable consolidated earnings growth.

Among the five analysts covering Chemed, three rate the stock buy or strong buy and two rate it hold, according to LSEG data.

In our earlier coverage of the S&P 500’s push toward the 8,000 level, we noted that markets were entering a critical stretch in which third-quarter earnings would need to be exceptionally strong to offset headwinds such as higher oil prices, elevated Treasury yields, and political uncertainty. The piece also highlighted growing concerns about narrow market breadth and concentration in megacaps, prompting some strategists to rotate toward more defensive areas like healthcare.

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