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Encompass Health (EHC)
NYSE:EHC
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Encompass Health
(NYSE:EHC)72Outperform
Positive Factors
Earnings
EHC reported Q4:24 results that beat consensus adjusted EPS estimates by +14.7%.
Growth Strategy
EHC plans to expand with new facilities and additional beds, indicating growth and investment in infrastructure.
Negative Factors
Margins
Margins are expected to decline due to higher corporate and startup costs.
Encompass Health (EHC) vs. S&P 500 (SPY)
Market Cap
$9.91B
Dividend Yield0.64%
Average Volume (3M)700.26K
Price to Earnings (P/E)22.1
Beta (1Y)0.57
Revenue Growth11.91%
EPS Growth28.47%
CountryUS
Employees37,761
SectorHealthcare
Sector Strength74
IndustryHealthcare Providers & Services
Share Statistics
EPS (TTM)4.46
Shares Outstanding100,709,110
10 Day Avg. Volume668,551
30 Day Avg. Volume700,264
Financial Highlights & Ratios
PEG Ratio0.78
Price to Book (P/B)N/A
Price to Sales (P/S)1.87
Price to Cash Flow (P/CF)9.00
P/FCF Ratio8.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$117.00Price Target Upside17.00% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
Encompass Health Business Overview & Revenue Model
Company DescriptionEncompass Health Corp. engages in providing post-acute healthcare services. It operates through the following segments: Inpatient Rehabilitation and Home Health & Hospice. The Inpatient Rehabilitation segment operates inpatient rehabilitation hospitals that provides rehabilitative treatment and care to patients who are recovering from stroke and other neurological disorders, cardiac & pulmonary conditions, brain & spinal cord injuries, complex orthopedic conditions and amputations. The Home Health and Hospice segment provides Medicare-certified home nursing, specialized home care and in-home services. The company was founded by Richard M. Scrushy on February 22, 1984 and is headquartered in Birmingham, AL.
How the Company Makes MoneyEncompass Health generates revenue primarily through its network of inpatient rehabilitation hospitals. The company's revenue model is centered around providing specialized rehabilitation services to patients, which are reimbursed by a combination of government healthcare programs such as Medicare and Medicaid, as well as private health insurance providers. Key revenue streams come from patient care services, including therapy sessions and related healthcare services provided during a patient's stay at their facilities. Encompass Health's financial performance is influenced by factors such as patient admissions, length of stay, reimbursement rates from insurers, and operational efficiency of its hospitals. The company may also engage in strategic partnerships and acquisitions to expand its service offerings and geographic presence, further contributing to its revenue growth.
Encompass Health Financial Statement Overview
Summary
Encompass Health demonstrates strong revenue growth and maintains solid profit margins. The balance sheet is stable with prudent leverage, yet the recent negative swing in free cash flow is a critical issue that needs attention.Income Statement
Encompass Health has shown consistent revenue growth with a 11.91% increase from 2023 to 2024. Their gross profit margin in 2024 is robust at 46.01%, although the net profit margin is moderate at 8.48%. The EBIT margin is 11.15%, and the EBITDA margin is 19.41%, indicating healthy operational efficiency. However, the dip in EBIT from 2023 suggests some operational challenges.75
Positive
Balance Sheet
The company's debt-to-equity ratio is relatively low at 0.17 in 2024, indicating cautious leverage management. Return on Equity (ROE) stands at 22.04%, reflecting strong profitability relative to equity. The equity ratio is 31.63%, suggesting a balanced approach between debt and equity. The increase in stockholders' equity from 2023 to 2024 is a positive sign.70
Positive
Cash Flow
Encompass Health's free cash flow has turned negative in 2024, which is a concern, especially given the prior positive free cash flow. The operating cash flow to net income ratio is negative, indicating cash flow issues, possibly due to high capital expenditures. This is a potential risk area that needs addressing.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 5.37B | 4.80B | 4.35B | 5.12B | 4.64B | Gross Profit |
| 2.47B | 933.50M | 4.15B | 4.91B | 4.44B | EBIT |
| 599.40M | 731.80M | 627.90M | 822.80M | 661.90M | EBITDA |
| 1.19B | 1.02B | 873.80M | 879.00M | 815.20M | Net Income Common Stockholders |
| 455.70M | 352.00M | 271.00M | 412.20M | 284.20M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 85.40M | 69.10M | 21.80M | 54.80M | 224.00M | Total Assets |
| 6.53B | 6.10B | 5.64B | 6.86B | 6.45B | Total Debt |
| 354.60M | 2.93B | 2.99B | 3.54B | 3.54B | Net Debt |
| 269.20M | 2.86B | 2.97B | 3.48B | 3.32B | Total Liabilities |
| 3.69B | 3.81B | 3.77B | 4.47B | 4.44B | Stockholders Equity |
| 2.07B | 1.65B | 1.31B | 1.91B | 1.59B |
| Cash Flow | Free Cash Flow | |||
| -645.60M | 267.70M | 121.70M | 164.60M | 296.50M | Operating Cash Flow |
| -3.10M | 850.80M | 705.80M | 715.80M | 704.70M | Investing Cash Flow |
| -653.30M | -602.80M | -627.00M | -666.30M | -407.50M | Financing Cash Flow |
| -330.60M | -197.20M | -145.70M | -240.10M | -145.90M |
Encompass Health Technical Analysis
Positive
100.00
Price Trends
96.64
Positive
97.89
Positive
93.13
Positive
Market Momentum
0.60
Positive
53.28
Neutral
61.19
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EHC, the sentiment is Positive. The current price of 100 is above the 20-day moving average (MA) of 99.82, above the 50-day MA of 96.64, and above the 200-day MA of 93.13, indicating a bullish trend. The MACD of 0.60 indicates Positive momentum. The RSI at 53.28 is Neutral, neither overbought nor oversold. The STOCH value of 61.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for EHC.
Encompass Health Risk Analysis
Encompass Health disclosed 33 risk factors in its most recent earnings report. Encompass Health reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Encompass Health Peers Comparison
Overall Rating
UnderperformOutperform
Sector (49)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $9.91B | 22.08 | 22.05% | 0.64% | 11.91% | 28.47% | |
72 Outperform | $11.67B | 3.81 | 76.72% | ― | 0.57% | 440.71% | |
66 Neutral | $2.28B | 10.67 | 12.73% | 2.79% | -0.63% | -13.10% | |
65 Neutral | $77.50B | 14.18 | -230.22% | 0.85% | 8.67% | 15.32% | |
61 Neutral | $2.83B | 10.97 | 8.32% | ― | 7.69% | ― | |
52 Neutral | $420.94M | ― | 39.18% | ― | 1.16% | -278.41% | |
49 Neutral | $7.05B | 0.34 | -55.09% | 2.46% | 25.27% | -3.43% |
* Healthcare Sector Average
Performance Comparison
EHC
Encompass Health
100.00
23.96
31.51%
ACHC
Acadia Healthcare
29.68
-55.04
-64.97%
CYH
Community Health
3.02
0.23
8.24%
HCA
HCA Healthcare
319.63
-1.26
-0.39%
SEM
Select Medical
18.04
3.09
20.67%
THC
Tenet Healthcare
126.02
28.68
29.46%
Encompass Health Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: 1.42% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong financial performance with significant growth in revenue, EBITDA, and Medicare Advantage discharges. However, challenges such as increased group medical costs and uncertain provider tax benefits present headwinds. The overall sentiment leans towards positive due to the robust financial metrics and strategic growth initiatives.Highlights
Strong Financial Performance
Revenue increased 12.7%, adjusted EBITDA increased 13.6%, adjusted EPS increased 23.2%, and adjusted free cash flow increased 103.7%.
Significant Discharge Growth
Total discharge growth for the quarter was 7.8%, with same-store discharge growth at 5.8%.
Medicare Advantage Growth
Medicare Advantage discharge growth was up 14.7% for the quarter and 12% year-to-date, with a five-year CAGR of 11.6%.
Cash Flow and Shareholder Returns
Adjusted free cash flow increased 103.7% to $190.5 million in Q4, with plans for continued share repurchase and potential dividend adjustments.
Bed Expansion and New Hospital Developments
Seven de novos and one satellite hospital planned for 2025, with 100 additional beds, highlighting strong growth in Florida.
Lowlights
Increased Group Medical Costs
Benefits expense per FTE increased 12.4%, driven by higher incidence of large dollar claims and utilization of high-cost specialty drugs.
Provider Tax and Self-Insurance Favorability Uncertain
2024 benefited from $15.4 million in net provider tax impact and $13 million in self-insurance accrual adjustments, which may not repeat in 2025.
Pressure from Contract Labor Costs
Premium labor costs, including contract labor and bonuses, remain a concern despite a slight decrease from the previous year.
Oracle Fusion Implementation Costs
2025 guidance includes $5.5 to $6.5 million in implementation costs for Oracle Fusion, impacting EBITDA.
Company Guidance
During the Encompass Health Corporation's fourth quarter 2024 earnings call, the company provided guidance for 2025, projecting net operating revenue between $5.8 billion and $5.9 billion, adjusted EBITDA ranging from $1.16 billion to $1.20 billion, and adjusted earnings per share between $4.67 and $4.96. The call highlighted several key financial metrics, including a 12.7% increase in revenue, a 13.6% rise in adjusted EBITDA, a 23.2% increase in adjusted EPS, and a significant 103.7% boost in adjusted free cash flow for Q4 2024 compared to the previous year. The company also discussed expectations for hospital net preopening and ramp-up costs, estimated at $18 to $22 million, mainly weighted towards the second half of 2025. Additionally, Encompass Health plans to continue expanding its hospital network, with several new facilities expected to open in 2025, contributing to the anticipated financial performance and strategic growth.Encompass Health Corporate Events
Executive/Board Changes
Encompass Health Approves Executive Compensation Increases
Neutral
Feb 21, 2025
In a meeting held on February 19-20, 2025, Encompass Health Corporation’s Board of Directors approved compensation increases for its executives for 2025. These decisions included a salary and bonus raise for CEO Mark J. Tarr, as well as adjustments for other key executives, to enhance competitive compensation packages and potentially improve retention and motivation within the leadership team.
Business Operations and StrategyFinancial Disclosures
Encompass Health Reports Strong Q4 2024 Financial Results
Positive
Feb 6, 2025
Encompass Health reported strong financial results for the fourth quarter of 2024, with notable revenue growth of 12.7%, driven by a 7.8% increase in discharges and a 4.2% rise in net patient revenue per discharge. Adjusted EBITDA rose by 13.6%, attributed to increased revenue, while operating cash flow surged by 38.7% due to higher net income and favorable working capital changes. The company issued 2025 guidance targeting net operating revenue between $5,800 to $5,900 million and Adjusted EBITDA from $1,160 to $1,200 million, reflecting a positive outlook on its operational strategy and long-term business prospects.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.