Encompass Health (EHC, Financial) has reported a notable performance in the first quarter, surpassing revenue expectations by posting $1.46 billion against the anticipated $1.43 billion. This reflects a 10.6% growth in revenue.
Adjusted EBITDA saw a robust increase of 14.9%, highlighting the company's effective operational strategies and strong market position. During the quarter, Encompass Health expanded its capacity by establishing a new 40-bed hospital and augmenting existing facilities with an additional 25 beds.
Leadership expressed confidence in the company's growth trajectory, emphasizing that its strategic initiatives are paying off. The positive financial results underscore Encompass Health's commitment to expanding its healthcare services and enhancing its operational efficiencies.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 11 analysts, the average target price for Encompass Health Corp (EHC, Financial) is $117.18 with a high estimate of $125.00 and a low estimate of $110.00. The average target implies an upside of 15.55% from the current price of $101.41. More detailed estimate data can be found on the Encompass Health Corp (EHC) Forecast page.
Based on the consensus recommendation from 12 brokerage firms, Encompass Health Corp's (EHC, Financial) average brokerage recommendation is currently 1.6, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Encompass Health Corp (EHC, Financial) in one year is $85.57, suggesting a downside of 15.62% from the current price of $101.41. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Encompass Health Corp (EHC) Summary page.
EHC Key Business Developments
Release Date: February 07, 2025
- Revenue: Increased 12.7% to $1.4 billion.
- Adjusted EBITDA: Increased 13.6% to $289.6 million.
- Adjusted EPS: Increased 23.2%.
- Adjusted Free Cash Flow: Increased 103.7% to $190.5 million for Q4, totaling approximately $690 million for the full year, a 31.3% increase from 2023.
- Total Discharge Growth: 7.8% for the quarter.
- Same-Store Discharge Growth: 5.8%.
- Net Revenue per Discharge: Increased 4.2%.
- Medicare Discharge Growth: Increased 6.8%.
- Medicare Advantage Discharge Growth: Increased 14.7%.
- Managed Care Discharge Growth: Increased 8.9%.
- Stroke Discharges: Increased 12.6%.
- Neurological Disorders Discharges: Increased 7.7%.
- Bad Debt Expense: Decreased by 200 basis points to 2.1%.
- Salaries and Wages per FTE: Increased 4.8%.
- Benefits Expense per FTE: Increased 30.6% for Q4 and 12.4% for the full year.
- Premium Labor Costs: $29.7 million in Q4, a decrease from $30.9 million in Q4 '23.
- Net Leverage: Reduced to 2.2 times at year-end 2024.
- 2025 Guidance - Net Operating Revenue: $5.8 billion to $5.9 billion.
- 2025 Guidance - Adjusted EBITDA: $1.16 billion to $1.20 billion.
- 2025 Guidance - Adjusted EPS: $4.67 to $4.96.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 12.7% to $1.4 billion, with adjusted EBITDA up 13.6% to $289.6 million.
- Adjusted EPS rose by 23.2%, and adjusted free cash flow increased by 103.7%.
- Total discharge growth for the quarter was 7.8%, with strong performance across patient mix, payers, and geographies.
- Encompass Health Corp (EHC, Financial) opened 36 new hospitals and added 474 beds from 2020 to 2024, increasing total bed supply by approximately 20%.
- The company plans to open seven new hospitals and add approximately 100 beds to existing hospitals in 2025, with significant expansion in Florida.
Negative Points
- Group medical and prescription drug costs are expected to remain elevated through the first half of 2025.
- The company faces challenges with pre-authorization requirements by Medicare Advantage plans, impacting access to care.
- There is a potential risk of increased construction costs and tariffs affecting future expansion plans.
- The 2025 guidance includes anticipated startup and ramp-up costs, which may impact EBITDA margins.
- Provider tax benefits in 2024 may not recur in 2025, adding uncertainty to financial projections.
