Why Is Encompass Health (EHC) Up 3.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Encompass Health (EHC). Shares have added about 3.8% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Encompass Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Encompass Health Q3 Earnings Beat on Higher DischargesEncompass Health reported third-quarter adjusted earnings per share (EPS) of $1.03, which beat the Zacks Consensus Estimate by 9.6%. The bottom line increased 19.8% year over year.Net operating revenues of $1.4 billion improved 11.6% year over year. The top line beat the consensus mark by 1.7%.Strong quarterly results benefited from strong discharges, net revenue per discharge, and impressive growth-related initiatives. However, a rise in operating expenses, particularly in salaries and benefits, acted as a partial offset.Q3 OperationsEncompass Health’s net patient revenue per discharge rose 2.5% year over year but fell short of our growth estimate of 3.5%. Total discharges grew 8.8% year over year to 62.7 million, higher than our growth estimate of 61 million. Total operating expenses of $1.14 billion escalated 11.1% year over year due to elevated salaries and benefits and other operating expenses. The metric came higher than our estimate of $1.13 billion. Net and comprehensive income climbed 29.7% year over year to $147.1 million in the third quarter. Adjusted EBITDA of $269.3 million grew 13.4% year over year and surpassed our estimate of $247.1 million.  Encompass Health added 10 beds to its existing hospitals in the third quarter. It also inaugurated two de novo hospitals.Financial Update (as of Sept. 30, 2024)Encompass Health exited the third quarter with cash and cash equivalents of $147.8 million, which more than doubled from the 2023-end level. Total assets of $6.5 billion increased 5.8% from the figure at 2023-end. Long-term debt, net of the current portion, amounted to $2.7 billion, which declined 12.8% from the figure as of Dec. 31, 2023. The current portion of long-term debt totaled $233 million.Total shareholders’ equity of $2.7 billion improved 18.4% from the 2023-end figure.Encompass Health generated $724 million of net cash from operations in the first nine months of 2024, which improved 11.4% from the prior-year comparable period. Adjusted free cash flow rose 15.6% year over year to $499.8 million.Capital Deployment UpdateEncompass Health bought back shares worth $23.6 million in the first nine months of 2024. The company had a leftover capacity of around $498 million under its buyback authorization as of Sept. 30, 2024.Management paid out a quarterly cash dividend of 17 cents per share.2024 Outlook UpdatedNet operating revenues are currently anticipated to be between $5.325 billion and $5.375 billion, up from the prior guidance of $5.275-$5.35 billion. The mid-point of the revised outlook indicates an improvement of 11.4% from the 2023 reported figure.Adjusted EBITDA is anticipated to be in the range of $1.07-$1.09 billion, higher than the earlier view of $1.04-$1.075 billion. The mid-point of the updated guidance indicates 11.2% growth from the 2023 figure. Adjusted EPS from continuing operations is expected to stay within $4.19-$4.33, up from the prior guided range of $3.97-$4.22. The mid-point of the revised outlook implies a 17% rise from the 2023 figure. Adjusted free cash flow is estimated to lie between $560 million and $620 million, up from the earlier range of $495-$580 million. Maintenance capex continues to be anticipated within $185-$195 million.The company expects to open six de novo hospitals with a total addition of 280 beds. It also expects to add around 110 beds to existing hospitals in 2024.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 aims to witness a CAGR of 6-8% in discharges in the same time frame.How Have Estimates Been Moving Since Then?It turns out, fresh estimates flatlined during the past month.VGM ScoresCurrently, Encompass Health has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEncompass 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 4.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.Quest Diagnostics reported revenues of $2.49 billion in the last reported quarter, representing a year-over-year change of +8.4%. EPS of $2.30 for the same period compares with $2.22 a year ago.Quest Diagnostics is expected to post earnings of $2.19 per share for the current quarter, representing a year-over-year change of +1.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.2%.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 D.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them 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 ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks