Chemed Going For Another $70M In Share Repurchase

Deutsche Bank has published a research report on Chemed Corporation CHE after the company revealed a new buyback plan that will provide an upside through 2011. In the report, Deutsche Bank writes "CHE authorized an additional $70M for stock repurchase which will be funded through a combination of cash and debt. As of September 30, 2010 the company had $45.4M outstanding under the current plan. Assuming the total $115.5 allotment is utilized this could result in an additional 3-5% accretion to our 2011 estimates or $2-3 to our price target. Our model assumes 975k share are repurchased in 2011. The additional allotment leaves an additional 664k (2.9% of existing shares) available for repurchase assuming a 10% premium to the existing share price. Recall in our Q3 earnings note, we sensed that CHE's capital deployment strategy could become more aggressive with buyback and it would seem that the company is moving in this direction. Key downside risks: competition, Medicare exposure and economic sensitivity in plumbing. Key upside: risks: more aggressive capital deployment (M&A/buyback) and housing recover." Deutsche Bank maintains its Hold rating and $61 price target on Chemed Corporation, which closed yesterday at $64.04.