Chemed Corporation presents a compelling defensive growth investment anchored by powerful demographic tailwinds and dominant market positioning in hospice care. Chemed is the nation’s largest hospice provider and stands directly in the path of an unprecedented wave of aging Americans. With all baby boomers surpassing age 65 by 2033 and the 65+ population projected to reach 98 million by 2060, the structural demand for end-of-life care appears virtually assured. The U.S. hospice market is forecast to grow at 8-10% annually through 2033, crossing $50 billion. Chemed’s 20-year compound annual growth rate of 20% in adjusted EPS since acquiring VITAS demonstrates management’s proven ability to execute through multiple cycles. With Medicare and Medicaid reimbursement increases of 2.6% for FY2026 confirmed and physician fee schedules rising 2.5%, the reimbursement environment remains supportive. However, Chemed also operates Roto-Rooter, the nation’s largest plumbing and drain cleaning services provider, which contributes 35% of total revenue. Both divisions are highly necessary services, which add to the company’s earnings stability and secular growth irrespective of the macroeconomic environment, and remains completely outside the path of destruction being brought on by the advent of artificial intelligence.

However, significant near-term headwinds particularly around Medicare Cap limitations and margin compression have exerted pressure on the stock. We believe this will prove to be transitory and would take advantage of the share price weakness. VITAS faces an estimated $19-25 million Medicare Cap billing limitation for 2025 in its Florida Combined program, driven by higher-than-national reimbursement rate increases that paradoxically penalize the segment. But management expects this issue to resolve itself in 2026 through geographic expansion into underserved areas of Florida. The Roto-Rooter segment—contributing roughly 35% of revenue—continues struggling with declining residential demand, posting only 1.1% Q3 2025 revenue growth and a 12.4% adjusted EBITDA decline to $49.4 million. However, the decline in profitability was due to a strategic decision management took: shifting from unpaid to paid lead generation, which increased SG&A costs. However, with zero debt, $130 million in cash, $300 million in annual free cash flow, and an aggressive $300 million share repurchase authorization, Chemed possesses the financial flexibility and decades of experience to navigate short-term turbulence while capturing the secular hospice growth opportunity. For patient investors, the combination of defensive healthcare exposure, demographic inevitability, and meaningful valuation discount creates an attractive risk-reward profile for 2026 and beyond.