Encompass Health Q2 Earnings Beat Estimates, Stock Up 7.4%

Shares of Encompass Health Corp EHC have risen 7.4% since it reported second-quarter 2025 results on Aug. 4. The quarterly results were aided by strong net patient revenue per discharge and capacity expansion measures, with 26 beds added to existing hospitals and a new de novo hospital opened. A hiked 2025 EPS view may have also favored investors’ sentiment surrounding the stock. However, the upside was partly offset by an elevated operating expense level due to increased salaries, benefits and other operating costs.

Encompass Health reported second-quarter 2025 adjusted earnings per share (EPS) of $1.40, which surpassed the Zacks Consensus Estimate by 16.7%. The bottom line advanced 26.1% year over year.

Net operating revenues rose 12% year over year to $1.5 billion. The top line beat the consensus mark by 2.3%.

Encompass Health Corporation Price, Consensus and EPS Surprise

Encompass Health Corporation price-consensus-eps-surprise-chart | Encompass Health Corporation Quote

EHC’s Q2 Operations

EHC’s net patient revenue per discharge grew 4.2% year over year to $21.7 billion, which surpassed our growth estimate of 1.7%. Total discharges were 65,237, which improved 7.2% year over year. The metric beat the consensus mark of 64,850 and our estimate of 64,901.

Total operating expenses of $1.2 billion increased 10.4% year over year due to higher salaries and benefits, and other operating expenses. The metric came higher than our estimate by 0.9%.

Net income advanced 26.2% year over year to $184.9 million in the second quarter.

Adjusted EBITDA of $318.6 million improved 17.4% year over year, which topped our estimate of $284.7 million.

Encompass Health added 26 beds to its existing hospitals in the quarter under review and inaugurated one de novo hospital.

Financial Update (As of June 30, 2025)

Encompass Health exited the second quarter with cash and cash equivalents of $99.1 million, which increased from the figure of $85.4 million at 2024-end.

Total assets of $6.8 billion were up 3.8% from the 2024-end level.

Long-term debt, net of the current portion, amounted to $2.3 billion, down 1.6% from the figure as of Dec. 31, 2024. The current portion of long-term debt totaled $139.2 million.

Total shareholders’ equity of $3 billion advanced 8.6% from the 2024-end figure.

EHC generated $270.2 million of net cash from operations in the second quarter, which climbed 24.3% year over year. Adjusted free cash of $185.9 million rallied 30.5% year over year.

Capital Deployment Update

Encompass Health bought back shares worth $24.7 million in the quarter under review. As of June 30, 2025, the company had a leftover capacity of around $433 million under its buyback authorization.

Management paid out a quarterly cash dividend of 17 cents per share. In July, EHC increased the quarterly cash dividend to 19 cents per share.

EHC Raises 2025 Outlook

Net operating revenues for 2025 are currently forecasted to be between $5.88 billion and $5.98 billion, higher than the earlier view of $5.85 billion and $5.925 billion. The midpoint of the revised guidance implies a 10.4% rise from the 2024 figure.

Adjusted EBITDA for 2025 is estimated to be between $1.22 billion and $1.25 billion, up from the prior guidance of $1.185-$1.22 billion. The midpoint of the updated guidance indicates 11.9% growth from the 2024 figure.

For 2025, adjusted EPS from continuing operations is expected to be between $5.12 and $5.34, higher than the prior view of $4.85-$5.10. The midpoint of the revised outlook suggests 18.1% growth from the 2024 figure.

Adjusted free cash flow is presently forecasted within the range of $705-$795 million, up from the earlier guidance of $620-$715 million. Maintenance capex continues to be expected in the range of $215-$225 million.

The company reiterated its aim to open seven de novo hospitals, adding 340 beds, and a 50-bed satellite hospital. In 2025, it also expects to add 100-120 beds to existing hospitals.

Growth Targets Reaffirmed

Over the 2023-2027 period, management aims to inaugurate six to 10 de novos each year, as well as make bed additions in the range of 80-120 each year. It also expects a CAGR of 6-8% in discharges in the same time frame.

EHC’s Zacks Rank & Other Key Picks

EHC currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Medical space are West Pharmaceutical Services Inc WST, Fresenius Medical Care AG & Co. FMS and Tenet Healthcare Corp THC, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for West Pharmaceutical Services’ current-year earnings of $6.60 per share has witnessed four upward revisions in the past 30 days against no movement in the opposite direction. West Pharmaceutical Services beat earnings estimates in each of the trailing four quarters, with the average surprise being 16.8%. The consensus estimate for current-year revenues is pegged at $3 billion, indicating 4.2% year-over-year growth.

The consensus estimate for Fresenius Medical Care’s current-year earnings of $2.22 per share has witnessed three upward revisions in the past 60 days against no movement in the opposite direction. Fresenius Medical Care beat earnings estimates in each of the trailing four quarters, with the average surprise being 7.6%. The consensus estimate for current-year revenues is pegged at $22.1 billion, indicating 5.6% year-over-year growth.

The Zacks Consensus Estimate for Tenet Healthcare’s current-year earnings of $15.54 per share has witnessed nine upward revisions in the past 30 days against no movement in the opposite direction. Tenet Healthcare beat earnings estimates in each of the trailing four quarters, with an average surprise being 31.2%. The consensus estimate for current-year revenues is pegged at $21.2 million, indicating 2.4% year-over-year growth.

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This article originally published on Zacks Investment Research (zacks.com).

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