Encompass Health (EHC) Up 8.6% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Encompass Health (EHC). Shares have added about 8.6% in that time frame, outperforming the S&P 500.But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Encompass Health due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Encompass Health Corporation before we dive into how investors and analysts have reacted as of late.Encompass Health Q2 Earnings Beat EstimatesEncompass 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%.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.EHC’s Q2 OperationsEHC’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 UpdateEncompass 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 OutlookNet 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 ReaffirmedOver 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.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a upward trend in fresh estimates.VGM ScoresCurrently, Encompass Health has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Encompass Health has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.Performance of an Industry PlayerEncompass Health belongs to the Zacks Medical - Outpatient and Home Healthcare industry. Another stock from the same industry, Quest Diagnostics (DGX), has gained 3.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2025.Quest Diagnostics reported revenues of $2.76 billion in the last reported quarter, representing a year-over-year change of +15.2%. EPS of $2.62 for the same period compares with $2.35 a year ago.For the current quarter, Quest Diagnostics is expected to post earnings of $2.51 per share, indicating a change of +9.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -0% over the last 30 days.Quest Diagnostics has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.Higher. Faster. Sooner. Buy These Stocks NowA small number of stocks are primed for a breakout, and you have a chance to get in before they take off.At any given time, there are only 220 Zacks Rank #1 Strong Buys. On average, this list more than doubles the S&P 500. We’ve combed through the latest Strong Buys and selected 7 compelling companies likely to jump sooner and climb higher than any other stock you could buy this month.You'll learn everything you need to know about these exciting trades in our brand-new Special Report, 7 Best Stocks for the Next 30 Days.Download the report free now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Encompass Health Corporation (EHC): Free Stock Analysis Report Quest Diagnostics Incorporated (DGX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks