Zacks Industry Outlook Highlights DaVita, Encompass Health, Option Care Health and Addus HomeCare

For Immediate ReleaseChicago, IL – April 11, 2025 – Today, Zacks Equity Research discusses DaVita Inc. DVA, Encompass Health Corp. EHC, Option Care Health, Inc. OPCH and Addus HomeCare Corp. ADUS.Industry: Outpatient HealthLink: https://www.zacks.com/commentary/2442600/4-stocks-to-watch-in-a-dynamic-outpatient-home-health-industryThe Zacks Medical - Outpatient and Home Healthcare industry has been witnessing a rapid shift toward digital healthcare treatment. In the past few years, there has been a significant rise in demand for telemedicine-focused online medical and artificial intelligence (AI)-powered technology services.The rising elderly global population is necessitating many healthcare companies that were traditionally not technology-based to provide technology-enabled services to survive in the market. Per a report by Grand View Research, the global home healthcare market was valued at $390.24 billion in 2023 and is anticipated to witness a CAGR of approximately 7.9% between 2024 and 2030. Another factor prompting these MedTech players to embrace digital healthcare is the skyrocketing healthcare costs.On a positive note, rising dependence on telehealth and AI is likely to help the industry thrive in the near term. DaVita Inc., Encompass Health Corp., Option Care Health, Inc. and Addus HomeCare Corp. are likely to gain from the prospects.Industry DescriptionThe industry comprises companies that offer ambulatory care in an outpatient setting or at home. They use advanced medical technologies for diagnosis, treatment and rehabilitation services. The players include operators of HMO medical centers, kidney dialysis centers and other outpatient care centers. After navigating a tough pandemic era, the payers and providers have been seeing steady growth on the back of innovation in services.This buoys optimism about prospects over the next few years, although persistent inflation in consumer prices could dent the outlook. The potential for scaling up innovation, prompted by the pandemic’s pressure on the healthcare system, is an added plus. Also, the acceleration of value-based care models and the increasing application of technology across the healthcare industry are likely to continue in the long run.Major Trends Shaping the Future of the Outpatient and Home Healthcare IndustryAging Population: One of the primary drivers of the home healthcare market is the aging global population. As people live longer, there is a growing demand for services that cater to chronic disease management, rehabilitation and daily living assistance. The rising elderly population is expected to fuel the need for home healthcare services.Cost Effectiveness: The primary advantage of outpatient clinics is cost-effectiveness. Outpatient medical care clinics do not retain patients for long hours (overnight) or charge exorbitantly. Modern-day outpatient clinics offer a broad spectrum of treatment and diagnostic options and even minor surgical procedures. Financial incentives like health plans and government program payment policies supporting services in lower-cost care settings have also been driving outpatient care.Additionally, with value-based models of care steadily emerging as the future of healthcare, the shift from fee-for-service (FFS) to alternative payment models (APM) is an ongoing parallel trend. FFS will be crucial to care organizations as a benchmark through which providers can assess APM.AI’s Dominant Role: AI has been a roaring success in healthcare. Outpatient companies prefer bots and automated techniques for managing health information. With the help of AI, hospitals have been achieving better outcomes, with patients receiving more efficient and personalized care. The outpatient industry has been generating huge profits from electronic health records (EHRs) and ePrescriptions.Technological Advancements: Virtual assistants and chatbots can help patients by answering questions about their care and connecting them with the information they need to make more informed decisions about their care. Increasingly, they will interface with EHR systems and be used to book and schedule appointments. They can also help patients stay compliant by reminding them to take medications or exercise.Home healthcare can gain from the benefits provided by Medicare (and several other payers), which comprise a broad range of services that can be delivered in a patient’s home, including post-operative and chronic wound care. Home healthcare has seen a surge in the utilization of the telehealth platform in response to the pandemic. With a rise in the elderly population and the increasing costs of in-person health care, the demand for home-based health care is on the rise. People with chronic illnesses and disabilities also require home-based care.Staffing Shortages: The U.S. healthcare industry has been experiencing a severe shortage of workers at every level. Among support personnel, there is a laxity of home health aides. The increasing international migration of health workers may aggravate health workforce shortfalls, especially in low-income and lower-middle-income countries. Another reason for the acute staffing shortage is high burnout due to physical, emotional and mental exhaustion. Thus, these overworked employees are leaving the profession at an accelerating rate.Tariff Impact: The newly-imposed tariffs aim to make imported goods more expensive, thereby making domestic production more competitive. This could lead to increased investment in U.S. manufacturing facilities for medical supplies and equipment, potentially resulting in a more robust and reliable supply chain for the home healthcare industry. Producing medical supplies and equipment domestically may lead to a more stable and predictable supply chain, reducing the likelihood of shortages and ensuring that home healthcare providers have consistent access to necessary products.Zacks Industry RankThe Zacks Medical - Outpatient and Home Healthcare industry falls within the broader Zacks Medical sector. It has a Zacks Industry Rank #31, which places it in the top 13% of nearly 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates promising near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.Before we present a few outpatient home health stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.Industry's Stock Market PerformanceThe industry has outperformed its sector and the Zacks S&P 500 Composite in the past year.The industry has lost 0.9% over this period compared with the S&P 500’s fall of 2.9% and the broader sector’s decline of 16.2%.Industry's Current ValuationOn the basis of the forward 12-month price-to-earnings (P/E), commonly used for valuing medical stocks, the industry is currently trading at 18.89X compared with the S&P 500’s 18.28X and the sector’s 18.34X.Over the last five years, the industry has traded as high as 25.30X and as low as 17.13X, with the median being at 20.44X.4 Outpatient and Home Healthcare Stocks to Watch NowOption Care Health: Option Care Health is a renowned independent provider of home and alternate site infusion services. In February, the company reported its fourth-quarter 2024 results, wherein it recorded a robust uptick in its net revenues. OPCH presently sports a Zacks Rank of 1 (Strong Buy).For this Bannockburn, IL-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 8.9%. The same for earnings indicates an increase of 36.6%.The company’s return on equity (ROE) of 15.6% compares favorably with the industry’s 8.3%.Addus HomeCare: Addus HomeCare, a key provider of home care services, announced its fourth-quarter 2024 results in February. The company registered a solid uptick in its net service revenues and personal care services revenues (reflecting both higher volumes and favorable reimbursement trends).ADUS’ hospice services revenues were also strong, reflecting steady improvement in the average daily census, patient days and revenue per patient day. Per management, the results reflect robust demand for the company’s home-based care services and its ability to meet the demand with its operating model across the care continuum. During the quarter, Addus HomeCare completed the acquisition of Gentiva personal care operations.ADUS presently flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.For this Frisco, TX-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 21.2%. The same for earnings indicates an increase of 14.8%.The company’s ROE of 9.3% compares favorably with the industry’s 8.3%.DaVita: DaVita, a renowned global comprehensive kidney care provider, reported its fourth-quarter 2024 results in February. The company registered an uptick in its overall top and bottom lines and robust segmental revenues. The opening of dialysis centers within the United States and opening and acquiring centers overseas were also seen. DVA carries a Zacks Rank #3 (Hold).For this Denver, CO-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 5.1%. The same for earnings indicates an increase of 11.2%.The company’s ROE of 115.5% compares favorably with the industry’s 8.3%.Encompass Health: Encompass Health (a well-known owner and operator of inpatient rehabilitation hospitals) and Piedmont announced the opening of the Rehabilitation Hospital of Athens in Athens, GA. The company reported its fourth-quarter 2024 results in February, wherein it registered an uptick in its overall revenue growth. Per management, growth resulted primarily from discharge growth, including same-store growth. Net patient revenue per discharge also grew during the quarter. EHC presently carries a Zacks Rank #3.For this Birmingham, AL-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 8.9%. The same for earnings indicates an increase of 8.4%.The company’s ROE of 17.6% compares favorably with the industry’s 8.3%.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. 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