EHC

Douglas E. Coltharp, EVP and chief financial officer of Encompass Health Corporation (NYSE:EHC), sold 18,869 shares of common stock on August 10 for a total transaction value of approximately $2.4 million, according to an SEC Form 4 filing. Transaction value based on SEC Form 4 weighted average sale price ($125.38); post-transaction value based on the August 10 market close ($125.81). How does this disposal impact the executive's total equity exposure?While the sale involved 18,869 shares of direct ownership, it represented only a small reduction in Coltharp's total interest in the company. The majority of his equity remains held indirectly through an irrevocable trust (27,480 shares), an irrevocable trust for the benefit of children (125,631 shares), and his spouse (37,749 shares). What financial metrics define the company's current scale?As of the August 10 market close, the firm carries a market capitalization of $12.5 billion. Its financial position is supported by trailing twelve-month revenue of $6.2 billion and net income of $621.0 million, reflecting its operational scale in the medical care facilities industry. What is the remaining scale of the executive's interest following the transaction?Coltharp maintains an equity interest of 241,000 shares, valued at approximately $30.4 million based on the market close on the transaction date. This position represents 0.2% of the total outstanding shares for the Birmingham-based healthcare services provider. Encompass Health Corporation operates a diversified post-acute healthcare platform delivering inpatient rehabilitation services and home health and hospice care across the United States through both dedicated facilities and in-home settings. The company generates revenue through its two primary divisions: Inpatient Rehabilitation, which provides focused recovery treatment on an inpatient and outpatient basis, and Home Health and Hospice, which delivers care services directly to patients in their residences. Encompass Health serves patients transitioning from acute care settings, including those recovering from significant illnesses, surgeries, and injuries, with a customer base comprised of healthcare systems, insurance providers, and individual patients requiring post-acute care services. Encompass Health Corporation is a leading operator in the post-acute healthcare sector, with a market capitalization of $12.5 billion and TTM revenues of $6.2 billion, positioning it as a significant provider of rehabilitation and home-based care services. The company's diversified business model across inpatient facilities and home health services provides revenue stability and exposure to the growing demand for post-acute care driven by an aging population and the shift toward value-based care delivery. With 42,300 employees and a strong net income margin of approximately 10% on TTM revenues, Encompass Health maintains operational scale and profitability in a fragmented market characterized by consolidation opportunities. This sale came on the same day as a much larger sale from the CEO of Encompass, so Coltharp's trim looks modest by comparison, and the contrast is worth noticing. Where Mark Tarr cut about 39% of his direct stake, Coltharp sold a far smaller slice and still holds the majority of his equity indirectly, spread across family trusts and his spouse. Two executives selling in the same window can look like a pattern, but the sizes tell different stories: one a sizable reduction and the other closer to routine.Nevertheless, neither seems to point to a problem with the business. Encompass reported earlier this month that revenue grew about 10% to $1.6 billion, raised its full-year guidance for the second time this year, and boosted its dividend and buyback authorization to $1 billion, all on rising demand for its rehabilitation hospitals. Coltharp is the one who laid out those raised targets, and the stock jumped to near a 52-week high on the results. For shareholders, the CFO's small sale into that strength is the easy part to set aside, and the more useful question is simply whether Encompass keeps hitting the numbers he just raised. 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Encompass Health’s second quarter reflected robust demand for inpatient rehabilitation, with the company delivering revenue growth above Wall Street expectations and a double-digit gain in non-GAAP earnings per share. Management attributed the strong results to ongoing investments in clinical workforce development and capacity additions, as well as continued momentum in treating higher-acuity patient categories like stroke and brain injury. CEO Mark Tarr highlighted that the company’s patient outcomes “continue to exceed industry averages,” and cited the expansion of professional growth programs for clinical staff as a key factor behind lower turnover and reduced premium labor costs. Is now the time to buy EHC? Find out in our full research report (it’s free). Revenue: $1.60 billion vs analyst estimates of $1.57 billion (9.6% year-on-year growth, 1.8% beat) Adjusted EPS: $1.55 vs analyst estimates of $1.48 (4.7% beat) Adjusted EBITDA: $348 million vs analyst estimates of $338.1 million (21.8% margin, 2.9% beat) The company slightly lifted its revenue guidance for the full year to $6.45 billion at the midpoint from $6.42 billion Management raised its full-year Adjusted EPS guidance to $6.14 at the midpoint, a 2.2% increase EBITDA guidance for the full year is $1.38 billion at the midpoint, above analyst estimates of $1.37 billion Operating Margin: 18.4%, in line with the same quarter last year Same-Store Sales rose 2.8% year on year (4.7% in the same quarter last year) Market Capitalization: $12.37 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Pito Chickering (Deutsche Bank) asked about how the company achieved leverage to raise EBITDA guidance despite lower Medicare pricing and higher wage growth assumptions; CFO Douglas Coltharp cited favorable pricing from higher patient acuity and benefits from staff retention initiatives. Matthew Gillmor (KeyBanc) followed up on North Carolina market opportunities; Coltharp said North Carolina could drive facility expansion toward the high end of the company’s annual target, with both large and small market potential. Ann Hynes (Mizuho Securities) questioned capital allocation between share repurchases and development; Coltharp emphasized that strong free cash flow enables both increased capital expenditures for growth and expanded shareholder returns. Benjamin Mayo (Leerink Partners) inquired about labor retention metrics; COO Patrick Tuer reported nursing turnover at a multi-year low and highlighted that career ladder participants have significantly better retention than non-participants. Andrew Mok (Barclays) asked if the gains in high-acuity admissions and same-store discharge growth are sustainable; Coltharp noted positive trends but cautioned that patient mix can fluctuate and the company avoids “cherry-picking” certain cases. In the coming quarters, the StockStory team will be monitoring (1) the pace and success of new hospital and bed expansions, particularly in newly deregulated states like North Carolina; (2) ongoing execution of workforce development and retention programs, including their impact on premium labor costs; and (3) the company’s ability to scale pilot initiatives addressing payer denials and leverage AI-driven operational improvements. Trends in high-acuity patient admissions and regulatory developments will also remain key signposts. Encompass Health currently trades at $125.33, up from $110.90 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members). ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively. Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 10 a.m. ET President and Chief Executive Officer - Mark Tarr Chief Investor Relations Officer - Mark Miller Operator: Good morning, everyone, and welcome to Encompass Health's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mark Miller, Encompass Health's Chief Investor Relations Officer. Please go ahead. Mark Miller: Thank you, operator, and good morning, everyone. Thank you for joining Encompass Health's Second Quarter 2026 Earnings Call. Before we begin, if you do not already have a copy, the second quarter earnings release, supplemental information and related Form 8-K filed with the SEC are available on our website at encompasshealth.com. On Page 2 of the supplemental information, you will find the safe harbor statements, which are also set forth in greater detail on the last page of the earnings release. During the call, we will make forward-looking statements such as guidance and growth projections, which are subject to risks and uncertainties, many of which are beyond our... [Technical Difficulty] Operator: We ask the audience to please stand by. I believe the speakers have reconnected to the live conference. Unknown Executive: Yes, we're in the main room. Mark Miller: [ Aaron ], can you hear me? Operator: Gentlemen, you are with the audience now. You have reconnected. I'm hearing a little bit of echo at the moment. Douglas Coltharp: Good morning, everyone. This is Doug Coltharp. We apologize for the technical difficulties we're experiencing this morning. These difficulties are arising through our vendors. It's a vendor we have historically used, and these are not on the Encompass Health side. We appreciate your patience. And with that, we are going to start from the top, assuming that you've heard nothing from us this morning, and I'm going to ask Mark Miller to begin. Mark Miller: Thank you, Doug, and good morning, everyone. Thank you for joining Encompass Health's Second Quarter 2026 Earnings Call. Before we begin, if you do not already have a copy, the second quarter earnings release, supplemental information and related Form 8-K filed with the SEC are available on our website at encompasshealth.com. On Page 2 of the supplemental information, you will find the safe harbor statements, which are also set forth in greater detail on the last page -- last page of the earnings release. During the call, we will make forward-looking statements such as guidance and growth projections, which are subject to risks and uncertainties, many of which are beyond our control. Certain risks and uncertainties, like those relating to regulatory developments as well as volume, bad debt and cost trends that could cause actual results to differ materially from our projections, estimates and expectations are discussed in the company's SEC filings, including the earnings release and related Form 8-K, the Form 10-K for the year ended December 31, 2025, the Form 10-Q for the quarter ended March 31, 2026, and the Form 10-Q for the quarter ended June 30, 2026, when filed. We encourage you to read them. You are cautioned not to place undue reliance on these estimates, projections, guidance and other forward-looking information presented, which are based on current estimates of future events and speak only as of today. We do not undertake a duty to update these forward-looking statements. Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information, at the end of the earnings release and as part of the Form 8-K filed yesterday with the SEC, all of which are available on our website. [Operator Instructions] With that, I'll turn the call over to President and Chief Executive Officer, Mark Tarr. Mark Tarr: Thank you, Mark, and good morning, everyone. We're very pleased with our second quarter results as revenue grew 9.6%, adjusted EBITDA increased 9.2% and adjusted EPS increased 10.7%. Based primarily on our Q2 results, we are again raising our guidance for 2026. Doug will review the details in his comments. Patient outcomes were again outstanding. Our Q2 discharge community rate was 84.7%, discharge to acute rate was 8.4% and discharge to skilled nursing facilities was 6.1%. Our performance on each of these quality metrics continues to exceed industry averages. We again experienced increased participation in our clinical staff professional growth and development programs, such as our career ladders, providing nurses with support to attain advanced licenses and certifications, including certified rehabilitation RN designation. We believe our success in these programs contributes to our favorable clinical staff turnover trends and helps to drive further declines in premium labor spend. Our professional growth and development programs also enhance our abilities to serve high-acuity medically complex patients. Demand for inpatient rehabilitation services remains strong, and we continue to invest in capacity additions. In Q2, we opened a new 50-bed hospital in Concordville, Pennsylvania; and a 40-bed hospital in Loganville, Georgia. Our Loganville Hospital is our eighth joint venture with Piedmont. We also added 10 beds to existing hospitals. Through the first half of the year, we opened 3 hospitals with a total of 139 beds and added 54 beds to existing hospitals. Over the balance of the year, we intend to open 5 more hospitals with a total of 250 beds and add 100 to 150 beds to existing hospitals. We maintain an active pipeline of new hospital development projects, both wholly owned and joint ventures while also executing on bed expansion opportunities as warranted by occupancy trends and market dynamics. Our pipeline of announced new hospital projects with opening dates beyond 2026 currently consists of 13 hospitals with 606 beds, and we anticipate additional projects, including small format hospitals will be announced over the balance of the year. Last month, North Carolina repealed its Certificate of Need law for inpatient rehabilitation care effective October 1 of this year. We believe this is a great result for the citizens of North Carolina who will now benefit from more access to inpatient rehabilitation care. North Carolina exhibits highly favorable population growth and demographic characteristics, and our assessment points to a large underserved market for IRF services. We currently operate 1 hospital in North Carolina. Replicating our approach to CON repeal in Florida in anticipation of the CON revocation in North Carolina, we conducted a thorough market-by-market analysis across the state. This has led to an initial prioritization of 15 markets, and we currently have 3 real estate parcels under contract. We anticipate our next hospital opening in North Carolina to occur in late 2028 or early 2029. Finally, on July 30, 2026, CMS released the 2027 IRF final rule, which we estimate will result in approximately 2.3% increase in net revenue per discharge for our Medicare patients beginning October 1, 2026 based on our current patient mix. Now I'll turn it over to Doug. Douglas Coltharp: Thank you, Mark, and good morning, everyone. Q2 revenue was up 9.6% over the second quarter of 2025. The increase was comprised of 5.6% discharge growth and a 3.9% increase in net revenue per discharge. Net revenue per discharge growth was driven by higher patient acuity. We continue to see very solid growth in medically complex categories, including stroke and brain injury. Bad debt expense in Q2 was 2.3%, in line with our expectations and the increase over last year is primarily due to a favorable reserve adjustment that occurred in the second quarter of '25. Our Q2 adjusted EBITDA increased 9.2% to $348 million, even as we absorbed an $11.5 million year-over-year decrease in net provider tax impact. Essentially, all of the year-over-year change in net provider tax impact relates to out-of-period adjustments to our accruals for the fiscal year 2025 Florida Medicaid program based on revisions promulgated by the state and approved by CMS in Q2 of this year. Q2 SWB per FTE increased 3.4%, in part driven by increased participation in our career ladder programs, partly offset by a decline in premium labor. Premium labor costs comprised of contract labor and sign-on and shift bonuses declined $2.6 million from Q2 '25 to $25 million. Contract labor FTEs as a percent of total FTEs was 1.1%, an improvement of 20 basis points from Q2 '25. Net preopening and ramp-up costs were $6.9 million, up $2.9 million from Q2 '25 and were $10.9 million on a year-to-date basis compared to $6.1 million in the first half of 2025. We continue to expect net preopening and ramp-up costs of $18 million to $22 million for the full year. During Q2, we repurchased approximately 704,000 shares of our common stock for a total of $74.2 million, bringing our year-to-date total share repurchases to approximately 1,412,000 shares and $145.8 million. During Q2, we issued $500 million of 5.875% Senior Notes due 2034 and used most of the proceeds from that issuance to redeem $400 million of our 4.5% senior notes due in 2028. Our net leverage at quarter end was 1.9x. Our leverage and liquidity remain well positioned. We recently announced an increase in our quarterly dividend next payable in October to $0.21 per share. And within our earnings release yesterday, we announced an increase in our common stock repurchase authorization to $1 billion. As Mark mentioned, we have again raised our 2026 guidance as follows: we now expect for the full year net operating revenue of $6.41 billion to $6.49 billion, adjusted EBITDA of $1.365 billion to $1.395 billion and adjusted earnings per share of $6.02 to $6.25. The considerations underlying our guidance can be found on Page 11 of the supplemental slides, and I want to take just a moment to highlight updated assumptions. Our Medicare pricing assumption for Q4 of approximately 2.3% reflects the IRF final rule released on July 30. Our revised expectation for full year 2026 SWB per FTE growth is 3.5% to 4% as we expect increased participation in both our nursing and therapy career ladder programs. As we have previously stated, we believe these programs contribute to favorable clinical staff retention trends, higher quality patient outcomes and reduced reliance on premium labor. We previously indicated that we expected the net provider tax impact to adjusted EBITDA for 2026 to be essentially flat with 2025 at approximately $21 million. Based on the retroactive adjustments specific to Florida that I mentioned earlier, we now expect the net benefit to adjusted EBITDA in 2026 to be approximately $10 million. And with that, we will open the lines for questions. Operator: [Operator Instructions] And we'll take our first question from Pito Chickering with Deutsche Bank. Pito Chickering: So you raised the guidance in the back half of the year by about $5 million despite assuming 10 basis points of lower Medicare pricing in the fourth quarter and SWB that's 500 basis points higher than you had assumed previously. So can you bridge us the good guys in the back half of the year versus last quarter to help understand how you got so much leverage to raise EBITDA despite those 2 macro pressures? Douglas Coltharp: Yes, Pito, this is Doug. I'll take a shot at it. So we had some favorability in the second quarter and really for the first half in a couple of areas. One is pricing, which was driven predominantly by patient acuity. There's no certainty that, that continues into the second half, but it does represent a source of potential upside. Additionally, we did see some further benefits in EPOB. Some of that is attributable to the fact that we've been running at a higher year-to-date occupancy level, and I can go through some of that, if you'd like. And it's also an ancillary benefit related to the career ladder program participation. And again, the causality there is we believe that the career ladder program participation is contributing to favorable clinical staff turnover. And when you've got favorable clinical staff turnover, that means that your new hires can consequentially come down, which means that you're spending less hours that would get into the EPOB calculation during orientation. Pito Chickering: Okay. Fair enough. And then can you talk about the same-store discharge growth in the quarter and the durability of that strength. Just as you think about the second quarter '26 stacked comps heading into easier comps in the back half of the year, should we be modeling more same-store discharge growth in the 4-plus percent for 3Q and 4Q? Douglas Coltharp: Yes. So again, this is a statement you've heard us made repeatedly for the last several quarters, but we believe increasingly that the distinction between same-store and total discharge growth is going to become less relevant and less consequential. We are up against easier comps in the second half of the year. And so that will be favorable. We also anticipate that the impact of the 4 unit closures that we had beginning in June of last year will dissipate a bit further. We've got a lot of new capacity coming on in the second half of the year. It is skewed more heavily towards Q4 than Q3, but that will be a contributor to some extent for total discharge growth as well. Operator: And we will take our next question from Matthew Gillmor with KeyBanc. Matthew Gillmor: Maybe following up on the North Carolina comments. I think you had mentioned there's 15 markets you're prioritizing. I was curious what you thought the overall opportunity is in North Carolina. And would that be enough to impact your de novo target of 6 to 10 per year or just maybe bias you towards the high end as you're thinking about beyond 2027? Douglas Coltharp: Yes, this is Doug. I think right now, if we could get 15 open, we feel pretty good about that, but that certainly doesn't mean that the opportunities in the state of North Carolina would be exhausted at that level. And I should note that, that 15 is looking at markets, both large and small as well. There are good pockets of opportunity really dispersed across the state, which is very exciting to us. I think at a minimum, it would drive us probably beginning in 2029 towards the high end of that 6 to 10 range. And there is some possibility just on how quickly we could pull those together as well as some opportunities that continue to develop in other states that we could wind up going above that. But right now, we're going to stay with the 6 to 10 range and hope that North Carolina pushes us to the upper end. Patrick Tuer: Matt, this is Pat. One additional point that I'd make there is as we get the small format hospital concept up and rolling, that will provide substantial opportunity and runway for us to continue to grow in North Carolina beyond just the traditional de novo format. Douglas Coltharp: And I think to piggyback on what Pat said, we've talked before about one of the benefits of the introduction of small format hospitals that allows us to approach certain markets with a hub-and-spoke type strategy. And given that we only have one hospital in the state of North Carolina and the extensive opportunities that are there, we're essentially starting with a blank sheet of paper. And so really utilizing the combination of de novos and small format hospitals to pursue that hub-and-spoke strategy in that market could be very compelling. And that's why you may not see it push the number of de novos up, but I think what will become increasingly important and we'll be able to provide some more visibility on this as we move into 2027 is what do we think is the opportunity for total beds to be added to the state. Matthew Gillmor: Great. And then as a follow-up, I wanted to ask about the payer denial topic. There was an OIG report that highlighted the wide variation in denial rates among MA plans for IRF services. I was curious what your reaction was to that report. And I also wanted to see if there were any early learnings from the admit and appeal strategy that you've discussed on prior calls. Douglas Coltharp: Yes. So I would say just in general that the denials through pre-authorization from Medicare Advantage continues to be a challenge. It's -- the trends that we saw in Q2 were not really dissimilar. We saw some marginal improvement from what we experienced in Q4 of last year and Q1 of this year, but there remains a very substantial disparity between what we see out of the MA plans and Medicare fee-for-service patients. We understand from the comments made by large MA providers that they are struggling to achieve what they deem as an acceptable level of profitability, but denying access to appropriate care for Medicare beneficiaries is not the right solution to that. We are very pleased with what we have seen thus far in the pilot program. And again, we -- that's the -- our admit and appeal strategy. We initiated that with select patients across 9 of our hospital markets towards the end of February. So it remains fairly early in the program. And remember, there are 5 various levels of appeal that you can go through. I won't take you through each of those 5 right now. Through the end of July, we had a total of 298 patients who had been admitted into our hospitals on that basis. 144 of those have been fully adjudicated. And of that 144, we have prevailed on 128, which is an 89% success rate. And I'll turn it over to Pat and maybe comment about how we see potential opportunities to extend that program in the future. Patrick Tuer: Thanks, Doug. I think the first opportunity for us to scale this up, within that 89%, there are certain diagnosis that are almost 100% or darn close to it. And I think as we think about scaling, it will likely be within those diagnosis categories that we move forward across the portfolio and then evaluate fully scaling the rest of the program up. But we're in conversations and evaluations of the education program and rollout that will have to take place for that to happen. And that's something we're preparing for now. But a broader rollout of the whole program, I think we still want to get some more time under our belt, bigger sample size, but there are certain things right now that we think have the potential to be scaled throughout the portfolio. Mark Tarr: Now we've talked in the past about just the stroke program in general and how we had -- some of the payers seem to recognize the value proposition around the stroke patients more so than others. And that would certainly be one of the diagnostic categories that Pat had mentioned that would be a likely candidate to try to push forward. Douglas Coltharp: And when you're prevailing at almost 90% on these patients, what it tells you is that those patients should have been admitted on the front end into our hospitals. And the fact that we have to go through this admit and appeal strategy is doing nothing but adding to the cost of the health care system by increasing the administrative cost. Patrick Tuer: Yes. I think just to put a bow on this, I think you could see that we'll look to scale certain parts of this in the coming quarters. And then by the end of the year, I think we'll be in a position to evaluate for a full broader rollout across the company. Operator: And we will move next to Ann Hynes with Mizuho Securities. Ann Hynes: So I guess my first question is you announced a nice share repurchase program. This morning, how do you view that versus your other capital needs going forward? And I did notice that year-over-year, you have a -- I think it was like a 20% increase maybe in CapEx year-over-year. And what is driving that? Is it just an acceleration of development versus last year? And then thanks for all the detail on South Carolina. I know that's a CON you've been waiting for, but I believe there's 2 other states. I think it's North Carolina and Tennessee that could be expanding CONs for inpatient rehab. Any updates on those? Douglas Coltharp: Yes. So it's North Carolina. South Carolina did not -- South Carolina was previously repealed, and we have a much larger presence where we have 11 hospitals in South Carolina already. We do hear that there is some dialogue around Tennessee, I don't know that anything is imminent there, but we continue to have good success getting CONs approved in Tennessee and have a couple of opportunities that are already in the pipeline there. Nothing else from a CON repeal perspective that is currently viewed as imminent. In terms of CapEx kind of going in reverse order here, yes, CapEx this year is running right at about 15% of revenue. We think that probably represents close to a high watermark. Most of the increase on a year-over-year basis is in capacity expansions, which is a good thing. And again, some of that is directly related to those high occupancy doors we referenced in Q1 and our ability to add beds there as well as what remains a robust de novo pipeline. And then as Pat alluded to previously, we're really excited about the introduction of the small format hospitals with the intent to get at least one open next year and then increase that to close to a handful at least on an annual basis beginning in 2028. The story on capital allocation, the increase in the share repurchase authorization notwithstanding remains unchanged. We like to say that we're an and story, not an or story because of the strength of our free cash flow and the resulting strength in our balance sheet, we have the capacity to increase the capital expenditures and increase the number of beds that we're adding to our overall franchise on an annual basis, but augment that with the dividend, which was increased for the October payout and increasingly with share repurchase activity. Operator: And we will move next to Whit Mayo with Leerink Partners. Benjamin Mayo: Mark, you've talked a good bit on this call about various investments in workforce development that you guys are making. Do you have any numbers that you could share around turnover, employee satisfaction, anything to gauge the impact that these investments are making? Mark Tarr: Yes, we do. I'm going to let Pat go into greater detail on that. But just a quick comment on the clinical ladders. We've -- that's not a new tool, but we have a team that did a really nice job kind of going in back in to look to see what appeals to the clinical workforce, updated things. We've promoted it internally. And we've had a really good response, which is definitely impacting our turnover rates. It's impacting our ability to not only retain staff, but it's affecting our ability to hire staff in both the existing hospitals and to staff up our de novo hospitals. So Pat, do you want to give some details around that? Patrick Tuer: Yes, sure, Mark. So on an annualized basis through Q2, our nursing turnover sits around 19%. That represents a low of 12-plus years. On the therapy perspective, we're just above 7%. That's our lowest turnover on an annualized basis in 5 years. So really pleased with the progress there. From a ladder perspective, we are up to 43% of eligible RNs and certified nurses that are participating on the ladder. If we think about the turnover within that group, it's only 5%. If they're a non-laddered nurse, the turnover is closer to 25%. If we can get a nurse certified, even if they're not on the ladder, turnover is only 12%. And we've increased the number of certified nurses by almost 21% versus prior year and 60% since 2023. So these programs are certainly having the intended outcome in terms of producing lower turnover, lower premium pay costs, the benefit to EPOB and lower unproductive time as well as allowing us to build enhanced clinical capabilities and fueling the value proposition through strong outcomes. So we're pretty excited about this. Mark Tarr: If somebody puts in the time and effort to get their CRRN, there's a pretty good chance they're going to stay in rehab as opposed to going out and trying other specialties. And as we've noted, I mean, these are increasing their clinical skills, which ultimately allows us to take medically complex patients, and it's just been proven out. So really seems like a lot of things are clicking on all cylinders around this initiative. Douglas Coltharp: We currently have approximately 22% of our RNs have the CRRN certification. That does carry a premium in terms of their wage rate. It's about 9% over their peers who do not have that certification. But as Pat just enumerated, we think that the benefits are more than offsetting. Benjamin Mayo: Got it. And maybe my follow-up, just wanted to get an update on the VA initiative and whether that's having any meaningful contribution to same-store growth. Patrick Tuer: Yes, thanks for teeing that up. That remains a source of pride for us and a very fulfilling patient population for us to serve. We -- this is the first quarter where we've really anniversaried a lot of the growth that we had in the VA program that we started talking about last year. And in Q2, we hit VA growth of around 33%. It now represents about 23% -- just under 23% of our managed care volume. And there still is a lot of runway there. Our local teams and our regional teams have done a really nice job collaborating with the VA populations within their markets. And just you may recall, we have talked about that there's 8 million veterans over the age of 65 in the country, and we're on pace to treat somewhere close to 10,000 by the end of the year. So substantial runway there. Douglas Coltharp: And as a reminder, that pays at the Medicare fee-for-service rate. Operator: And we will move next to Ryan Langston with TD Cowen. Ryan Langston: Maybe I missed this. I got dropped from the call, unfortunately. But maybe just an update on the recently opened facilities versus the bed additions over the last year and maybe how each of those cohorts have been ramping versus your historical average? Douglas Coltharp: Yes. I think the bed additions in the de novos continue to ramp very favorably. If we look at the openings on a year-to-date basis, in Q1, we opened 1 hospital with 49 beds. In Q2, we opened 2 hospitals with a total of 90 beds. From a bed expansion perspective, in Q1, we added 44 beds. In Q2, we added 10 beds. Those 10 beds importantly, were added to 3 of the hospitals that in Q1 had an occupancy level of north of 95%. As we've stated previously, the returns on our de novos are in part driven by the fact that we have -- tend to experience a very rapid ramp-up in those. On average, our de novos achieve 4-wall positive EBITDA by the time they hit month 6, and they're typically north of a 70% occupancy rate by the time they get to month 10. Now those are averages, so some are faster and some are slower. But we think that over the years that we've been pursuing an accelerated de novo strategy, which really came to fruition in 2021, we have further refined our processes. We've set up dedicated teams across functions to do nothing but open the de novos. And as a result, the progress that we're making from the day that we opened the doors has really improved and has increased the time to achieving 4-wall profitability. Patrick Tuer: One thing I would add to that is just as we think about bed additions in last quarter, we talked a lot about the capacity-constrained hospitals and the cohort that represented that. We have lowered the threshold of when we start the evaluation process for bed additions, just to try to time that capacity coming online to when we actually need it. So we're not missing out on potential volume. So we, again, have lowered that threshold to 70% to 75% versus the historical 80% to 85% threshold. Mark Tarr: Ryan, I'd also say it's been really nice to see the ramp-up momentum in hospitals, not only like in the state of Florida, where we have a well-known brand, but as we've gone out into new states, Connecticut, we opened up in Rhode Island a couple of years ago. Those are markets where you really have to do a lot of education about IRF versus SNF and it's been really, really nice to see the ramp-up in these new markets to complement the states where we already have a strong presence. Douglas Coltharp: I think it's important to note that the increase that we've been experiencing over the last several years in system-wide occupancy is an important driver of efficiency, and you're seeing that flow through the P&L. And to put a finer point on that, our Q2 occupancy of 77.4% was up 290 basis points over Q2 '25. And sequentially, occupancy decreased only 130 basis points from Q1 of this year, and that compares to a decrease of 220 basis points from Q1 to Q2 in each of '25 and '24. And further, our average daily census or ADC decreased only 69 from Q1 as compared to a sequential Q1 to Q2 decrease in ADC of 184 in '25 and 113 in '24. Q1 and Q2 also represented the first 2 quarters in company history with ADC in excess of 9,000. Ryan Langston: Great. Appreciate all the detail. Just a quick follow-up, maybe to Ann's question on share repurchase. How should we think about you utilizing this over time? I don't think the EPS guidance change implies a material increase in repurchase through the back half of the year. But any reason we shouldn't think that this could ramp up at least versus the first half? Douglas Coltharp: Yes. The EPS guidance change reflects only the share repurchases that have been accomplished year-to-date. I think you have seen an increase in the last 3 quarters from our historical run rate in share repurchase. We continue to have capacity in the balance sheet based on the leverage ratio that we're running. And also then we have capacity just given the free cash flow and the relationship of that free cash flow to our growth CapEx number as well. So clearly, there's capacity for increased share repurchase activity in the future. And if that had not been the case, I don't think the Board would have taken the action of increasing the authorization. Operator: And we will take our next question from Joanna Gajuk with Bank of America. Joanna Gajuk: So a couple of questions. So first, I guess, on the volume discussion, and you mentioned that you're seeing higher acuity. And I guess in the past, you gave us the stats, I haven't heard them. So I want to ask, can you give us some of these growth rates by category, like the stroke, neuro brain injury versus ortho hip and knee? Douglas Coltharp: Yes, we can do that. Patrick Tuer: I can touch on that to start. Two of the largest categories of growth for us were in stroke and brain injury. Those were up 7.9% and 8%, respectively, on a same-store basis, 5.5%, 3.9%, respectively. Brain injury has been a -- we talked about this on the last call, probably the call before that as well, we continue to see a lot of growth in brain injury, specifically non-traumatic brain injury, which from a claims perspective, represents the largest source of potential market capture for us. So it's great to see us capitalize on that. Douglas Coltharp: Yes. I think you asked specifically about lower extremity joint replacement. Knee and hip replacement, which is how we categorize that, was up only modestly, about 1% in the quarter. Joanna Gajuk: Okay. Great. Yes, that's what I was getting. So clearly, these other categories higher acuity growing much faster than orthopedics. And if I may follow-up, in terms of, I guess, de novo and the plans adding beds and such as it relates to the pent-up demand, can you give us the stat you gave us last quarter in terms of percent of your hospitals that are above 90% occupied? And to that end, can you talk about the bed expansions or de novos, right? And how much, I guess, you achieved in terms of capturing the pent-up demand in the hospitals you called out prior to that quarter? Douglas Coltharp: Yes, absolutely. So in Q1, we had 65 hospitals with occupancy rates greater than 90% and an average in that cohort of 95%. In Q2, we had 60 hospitals at greater than 90%, so a decrease of 5 with an average occupancy rate of 94%. Three of those hospitals that dropped from that cohort did so because of the bed expansions that occurred in the first half. And approximately 90% of the bed additions that we have in the pipeline and targeted for the second half of this year and the first half of next year are going into hospitals that are in that greater than 90% cohort. It's the definition of a high-class problem. Operator: And we will move next to Andrew Mok with Barclays. Andrew Mok: The same-store discharge growth of 2.8% accelerated 120 basis points sequentially despite tougher comps. One, did that finish better than internal expectations? And if those higher acuity categories that you called out are driving the better volumes and are expected to continue, why is there a hesitation to say that those acuity gains are -- may not be sustainable? Douglas Coltharp: Yes. So first, we're not going to comment on performance versus internal expectations. We -- again, we will just compare it to guidance. And obviously, we revised our guidance upwards for the full year based on the second quarter performance. This is, again, one where we continue to believe that the breakdown between same-store and total discharge growth is less relevant because you can be influenced in any particular quarter by bed additions, which go immediately into the same-store count and also by the maturation of de novos, which were outside of the same-store category into the same-store category. And there are other influences that we've cited previously that can impact same-store discharge growth from quarter-to-quarter. With regard to the increase in acuity, we think that is very positive, one, because there's a bit of a competitive moat around that. It is a real challenge to treat successfully those more medically complex programs, and we're very proud of the clinical programs that we have in place that allow us to do that. It also creates a competitive advantage because part of the value proposition, a significant portion of the value proposition that we have for our upstream acute care partners is the ability to take those patients out of their facilities with a lower length of stay in the acute care hospital, which frees up the bed for them. Patrick Tuer: Andrew, this is Pat. I think -- I don't think it's a reluctance for us to commit to that in the foreseeable future. I think what -- from our standpoint, we see fluctuations in acuity from quarter-to-quarter, year-to-year. And while we're very confident in the ability for us to capture that market share, I don't think it'd be prudent for us to back us into a corner that -- and then have one of those fluctuations that occur from time to time. But we're very confident in the outcomes that we provide and the access to care that we're able to provide, and our teams do a great job of capitalizing on that. Douglas Coltharp: Another factor that can impact the acuity is it's important that we not be perceived by our referral sources as cherry-picking certain types of patients. We could create the most value for our referral sources, the hospitals and the attending physicians if we're willing to accept all patients who qualify for admission into an inpatient rehabilitation facility and not just say we're only going to take your stroke or your brain injury patients. And so doing that based on the flows that come into an acute care hospital in any particular quarter can cause some fluctuations in that acuity. But again, when you look at some of the headwinds that are now baked into our guidance, specifically incorporated into the second half, one of the potential areas of upside that I cited earlier is seeing improved pricing continue for the balance of this year based on some sustainability in that higher acuity. Operator: And we will move next to A.J. Rice with UBS. Albert Rice: First, I just wanted to ask about one more question on the career ladder and the decision to boost your SWB expense growth by 50 basis points. Is that -- should we think of that as this year only? Or are you trading off higher wage growth on an ongoing basis for better turnover and then the back-end benefits of that? How should we think about this? Douglas Coltharp: Yes. I think right now, it is an assumption for this year only and specifically for the back half trend. We believe that as we move just because of the success we've had in the participation in these ladders on a year-to-date basis, as we move into next year, we would expect to start anniversarying some of those increases. And so we should see the SWB per FTE moderate that, but we're not ready to call a level on it yet. And remember, as we move into the second half of this year, we're also up against easier comps -- or excuse me, tougher comps in terms of more favorable outcomes from last year. If you look at Q3 of '25, SWB per FTE inflation was 2.6%. And in Q4, it was 2.1%. That compares to 3.2% in Q1 of '25 and 4% in Q2 of '25. Albert Rice: Okay. Yes. No, that's helpful. I just wondered also any update on your technology investments and AI initiatives? I know you have called out previously a partnership with Palantir around claims processing and on the administrative side. Are you seeing any meaningful efficiencies yet? Or is that mostly still in front of you? Douglas Coltharp: I think a lot of it is still in front of us, but we've definitely seen many enhancements in our processes, both -- there's a lot of AI that is now embedded as an aid or a tool in our clinical workflows that aid the patient journey, everything from the prescreen narrative to automation of the face-to-face notes. We've used it to enhance our falls risk model, our ReACT model and our readmission model. We've spoken previously about the agentic solution we have, which we call HANA for following up with recently discharged patients. On the administrative side, it really runs the gamut from agents that are helping us with the monthly closing of the books and scanning journal entries for exceptions. We referenced previously that what is coming soon is going to be an enhanced market analytics tool that's really going to help us to buy the appropriate real estate strategy for markets that we're entering. We think it's going to be very useful as we map out our strategy for North Carolina. So there's a lot in the pipeline. Mark Tarr: But I will say, A.J., we've got a team that's been very intentional in terms of prioritizing projects and initiatives that -- in which we wanted to work with Palantir. So we're looking for those that can benefit us the greatest in terms of either efficiencies or working through projects like the development of opportunities and evaluating markets. So I'm with Doug, I think that the benefits still are out in front of us, but I'm very encouraged about where we are and probably more importantly, how we're going about it as an organization. Patrick Tuer: A.J., this is Pat. Just a couple of other call-outs from a use case perspective that I'm pretty excited about. In addition to the ones that Doug talked about, one of the challenges that we have from an operations perspective is when we are manually auditing records and clinical systems, it takes a lot of time. It takes a lot of effort. It takes a lot of resources. And we're developing a solution with Palantir and our ITG team, our internal IT team that will proactively and concurrently scan our medical records for any potential risk area, if an order is not followed or if an order is delayed, and you can act and intervene in real time. So I'm pretty excited about that. And then not specific to Palantir, but we did talk in prior calls about our Fusion ERP conversion. And we've gotten our sea legs under us with that. We continue to enhance that system, and we're evaluating opportunities that may come with that to centralize certain tasks that could reduce or create efficiencies for us in the near future. We're just not ready to call those out just yet. Operator: And we will take our next question from Brian Tanquilut with Jefferies. Brian Tanquilut: Congrats on the quarter. Maybe, Doug, as I think about temp staff or contract labor utilization, obviously down a decent bit during the quarter. Just curious how we should be thinking about the back half, especially in light of planned openings coming up in the pipeline. Douglas Coltharp: Yes. So we've historically been very good about not having to tap into contract labor for de novo openings, and we would hope that will continue to be the case in the second half. We're really proud of the progress that we have made and that we continue to make on decreasing the utilization of premium labor. Q2 marked our 11th consecutive quarter where we had a year-over-year decline in premium labor cost even as over that period of time, our volume has increased substantially. But being at 1.1% of total FTEs in contract FTEs and the fact that the rate has really stabilized for about a 2-year period right now at an annual rate of about $175,000, we've kind of hit the point of diminishing returns. So part of what's embedded in the increased assumption for SWB per FTE the inflation rate there for the second half is just that realization that incrementally, we would hope to continue to improve, but the level of improvement is going to be less than it has been for the last almost 3 years. Patrick Tuer: Just to add to that, this is Pat. Doug is right. There's some diminishing returns on this, but there is still juice left to squeeze here. Again, it's just going to be smaller than what we have been able to produce over the last several quarters sequentially. A couple of call-outs. The -- in January, we started a pilot with our top 10 markets from a contract labor extra shift and sign-on perspective that had historical recruiting challenges, and we worked with our talent acquisition team and our regional operators and piloted partnership around recruitment and marketing. And we saw a substantial improvement in the majority of those markets way over the historical hiring trends that had occurred, and we saw nice reductions there. Some of those markets are still going to see continued improvement, which we will benefit from. And then there's opportunities for us to take that pilot to other markets that are challenged as well. And then I'll just call out that this was our best hiring quarter that we've had in some time. And that comes off of a really strong Q1. So just -- I know that, that can change year-over-year. But right now, from a labor availability perspective, it's probably the least stressed that I've been about it in several years. Brian Tanquilut: That's awesome. And then, Doug, I noticed the new slide added there, Slide 19 for the RCD and Team. Just curious, anything you can share with us in terms of what you're seeing with RCD at this point? Douglas Coltharp: Yes. So I would say things continue to be about the same in Alabama. We're above for all 7 of our hospitals. We're above the target affirmation rate, which is north of 90%. The rollout in Texas has gone very well. And there, we're seeing affirmation rates that are consistent with what Novitas had demonstrated in Pennsylvania previously of north of 98%. California, which is a smaller number of our hospitals, I would say that the MAC was less well prepared than we would have hoped for, but they're continuing to make some progress. We're above the target affirmation rate there, and we would expect continued improvement. We don't really see any reason why that should differ from the experience that we've been having in the state of Texas. And then finally, the inclusion of our hospitals in Pennsylvania has been deferred for a period of time, but we will have a couple of hospitals in Pennsylvania that we believe will be subject to RCD beginning in 2027. The experience for other providers in the state of Pennsylvania thus far has been positive. And so we're optimistic about that as well. And then we're not currently aware of plans by CMS to extend RCD into any other states at this time. Operator: And we will move next to Jared Haase with William Blair. Jared Haase: Maybe I'll just stick with one as we get towards the end of the call. I wanted to go back on the career ladder programs and appreciate the investment that you're making there. I wanted to sort of try and connect that back to the model a little bit. So when I think about the dialogue that you have with referral partners to drive volumes, are you actually able to articulate some of that data around, let's say, the tenure of your workforce, the mix of credentials, turnover rates, things like that directly? I sort of get ultimately, at the end of the day, quality measures, readmission rates are probably the main things that they're going to focus on. In some sense, that's basically downstream from the quality of our workforce. So just trying to get a sense of how that actually plays out in the go-to-market as you try to capture volume. Patrick Tuer: Yes. Jared, I think those conversations directly around turnover and the improvements to the overall business are more direct with our joint venture partners than they are non-partners. I think for non-partners and joint venture partners, the primary focus comes down to outcomes and how fast can we take their patients. And if we have a more stable, trained clinical workforce, we're able to do those -- take a wider variety of conditions and take them sooner before certain conditions can resolve and reduce acute length of stay and associated readmission. So that's really where the conversations come in. But again, from a partner perspective, they're very interested in those labor dynamics as it has a direct line to their distributions. Douglas Coltharp: I would also say that the more skilled and more tenured your clinical workforce is, there's a correlation of that to your ability to obtain at a hospital level disease-specific certifications. And when we can go to a referral source, citing the disease-specific certifications that we have and then providing them with our clinical outcomes, that presents a very compelling case. Operator: And we'll take our next question from Raj Kumar with Stephens. Raj Kumar: Maybe just kind of going back to the North Carolina opportunity. I guess curious on that front, how you see it in terms of JV versus wholly owned? And then kind of thinking as Florida as a use case, maybe kind of illustrating the kind of ramp in that state and kind of what the time line looks like to kind of reach your kind of targeted market share or saying getting your fair share from kind of acute admissions in that market? Mark Tarr: I'll take the first part of that. I mean I think that North Carolina will be like what we've seen in other states. It will be a combination of some wholly-owned hospitals and some JV partnerships. Our existing hospital in Winston-Salem is a partnership with the Novant system. So I think that as we initially look at these 15 markets, we see some that may be more likely to be partnered than others, just given the dynamics in the marketplace. But I think you could count on a mixture of some wholly owned and some joint venture facilities within the 15 markets. Douglas Coltharp: There are a number -- any number of benefits that are attendant to a joint venture versus a wholly owned, one of them is the ability to get a CON foothold in a state because the acute care partner is already established by definition, and we may be new to that market or to that state in particular. That doesn't apply when you've got the CON barrier removed. So there are some analogies to Florida, but some distinctions as well. If you think about it, when the CON was revoked in Florida, we already had a presence with 12 existing hospitals. So we were well known to many of the acute care providers, and that facilitated more of a balance of joint ventures and wholly owned. And that's a little bit distinct from North Carolina, where we have just one, even though it is in a joint venture. Where you get a more parallel path, though, is that we felt that first-mover advantage was extremely important, and we can move faster alone than we can negotiating joint ventures on the front end. So with the expansion in Florida, what you saw us do is go out and initially move with a portfolio approach that was much more balanced towards wholly owned than joint ventures. But as we got along the way and announced certain projects, a number of those that started as wholly owned converted to joint venture opportunities. And I would expect a similar type of trajectory in North Carolina. We're prepared to move quickly and start projects, and we're going to do that. And once those projects are announced, we'll survey the market and make a determination as to whether or not that particular project would benefit from the presence of a joint venture partner. Operator: This concludes the Q&A portion of today's call. I will now turn the program over to Mark Miller for closing remarks. Mark Miller: Thank you, operator. If anyone has additional questions, please call me at (205) 970-5860. Thank you again for joining today's call. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Before you buy stock in Encompass Health, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Encompass Health wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Encompass Health (EHC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Aveanna Healthcare Holdings Inc. AVAH is set to report second-quarter 2026 results on Aug. 13, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at 17 cents per share on revenues of $647.08 million. The second-quarter earnings estimate has witnessed one upward revision and no downward movement over the past 60 days. However, the bottom-line projection indicates a year-over-year decrease of 5.6%. But the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 9.8%. Image Source: Zacks Investment Research For full-year 2026, the Zacks Consensus Estimate for Aveanna Healthcare’s revenues is pegged at $2.65 billion, implying a rise of 8.8% year over year. The consensus mark for 2026 earnings per share is pegged at 73 cents, indicating a jump of 21.7% on a year-over-year basis. Aveanna Healthcare beat the consensus estimate for earnings in each of the trailing four quarters, with the average surprise being 129.4%, as you can see below. Aveanna Healthcare Holdings Inc. price-eps-surprise | Aveanna Healthcare Holdings Inc. Quote Our proven model does not conclusively predict an earnings beat for the company this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s not the case here. AVAH has an Earnings ESP of 0.00% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for revenues from the PDS segment indicates 9.1% year-over-year growth. AVAH is expected to have witnessed a 9.5% increase in hours, while the revenue rate is likely to have declined 0.4% from the year-ago level. Gross margin from the PDS segment is expected to have declined 8.5% year over year. Higher cost of revenues are also expected to have increased total expenses, partly offset by lower corporate expenses. These factors are likely to have weighed on the bottom line. The consensus estimate for the HHH unit’s revenues signals a 9.5% increase from the year-ago period. Unique patients served (UPS) are expected to have increased 3.9%, while the revenue rate is likely to have risen 2.5%. Gross margin from the segment is expected to have increased 7.7%. Revenues from the MS segment are expected to have increased 6.5% year over year in the second quarter. Gross margin from the segment is also likely to have improved 5.1%. Companies in the broader Medical space, like Encompass Health Corporation EHC, The Ensign Group, Inc. ENSG and Universal Health Services, Inc. UHS, have already reported their results for the June quarter, and here’s how they have performed. Encompass Health reported second-quarter adjusted EPS of $1.55, which beat the Zacks Consensus Estimate by 4.7% and increased 10.7% year over year. Its results were primarily driven by strong growth in net patient revenue per discharge, supported by solid discharge volumes and contributions from capacity expansion. However, the upside was partly offset by EHC’s elevated operating expenses. Ensign reported second-quarter 2026 adjusted EPS of $1.92, which beat the Zacks Consensus Estimate by 6.7% and improved 20.8% year over year. ENSG’s strong results were driven by higher occupancy, improved patient days and contributions from acquired and transitioning facilities, along with growth in rental income. The positives were partly offset by higher expenses. Universal Health Services reported second-quarter 2026 adjusted EPS of $5.98, which beat the Zacks Consensus Estimate by 5.7%. The bottom line rose 10.1% year over year. The strong quarterly results were driven by healthy revenue growth across both the Acute Care and Behavioral Health segments. Higher adjusted admissions, increased patient days and improved unit revenues on a same-facility basis supported performance in both businesses. However, the upside was partly offset by UHS’ elevated operating costs. 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 Aveanna Healthcare Holdings Inc. (AVAH) : Free Stock Analysis Report Universal Health Services, Inc. (UHS) : Free Stock Analysis Report The Ensign Group, Inc. (ENSG) : Free Stock Analysis Report Encompass Health Corporation (EHC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Get insights on thousands of stocks from the global community of over 7 million individual investors at Simply Wall St. Encompass Health (EHC) shares are in focus after the company reported second quarter revenue of about US$1.6b and earnings per share of US$1.55, both above analyst expectations, alongside higher full year 2026 revenue guidance. See our latest analysis for Encompass Health. At a share price of US$125.23, Encompass Health has a 7 day share price return of 12.75% and a 90 day share price return of 18.03%. Its 3 year total shareholder return of 80.09% points to momentum that has been building over time rather than appearing overnight. If this earnings move has you looking beyond Encompass Health, it could be a good moment to broaden your watchlist with 43 healthcare AI stocks After a jump like this, it is easy to assume the good news is already priced in. The real question is whether Encompass Health still trades with upside implied by fundamentals, or if most of that move now sits in the rear-view mirror. Encompass Health now trades on a P/E of 20.5x, which sits above its direct peer average of 18.2x yet below the broader US Healthcare industry at 25.4x. The P/E multiple compares the current share price to the company’s earnings per share. For a hospital operator like Encompass Health, it gives you a quick sense of how much investors are paying for each dollar of current earnings. On one hand, the stock screens as expensive against its immediate peer group. This suggests the market is willing to pay a premium for its earnings profile. On the other hand, the current 20.5x P/E is below the estimated fair P/E of 25.1x that the SWS model points to as a level the multiple could move towards if the market prices Encompass Health in line with those underlying drivers. Against the broader US Healthcare industry, Encompass Health trades at a discount to the average P/E of 25.4x. That combination, a premium to peers but a discount to both the fair P/E estimate and the industry average, highlights how investors appear to price its earnings somewhere between a pure peer comparison and a higher quality profile that the fair ratio implies. Explore the SWS fair ratio for Encompass Health. Result: Price-to-earnings of 20.5x (ABOUT RIGHT) However, investors should still watch key risks for Encompass Health, including potential shifts in Medicare reimbursement and any slowdown in revenue or net income. Find out about the key risks to this Encompass Health narrative. The P/E discussion suggests Encompass Health looks roughly in line with what investors are willing to pay for its earnings. The SWS DCF model offers a different angle. It points to a fair value of $159.90 per share, compared with the current $125.23 price, which implies the stock is trading below that cash flow estimate. The question is whether you place more weight on earnings multiples or on long term cash flows for a hospital operator like this. Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Encompass Health for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. If the mixed picture on Encompass Health leaves you unsure, treat this as a prompt to move quickly and review the full risk and reward balance for yourself with 3 key rewards and 1 important warning sign If Encompass Health has your attention today, do not stop there. Use this momentum to broaden your opportunity set and pressure test your next moves. Target potential value opportunities early by scanning companies that currently screen as attractively priced with solid fundamentals using the 51 high quality undervalued stocks. Strengthen your focus on resilience by checking stocks that pass strict financial health filters through the solid balance sheet and fundamentals stocks screener (49 results). Hunt for off-the-radar opportunities before the crowd catches on by reviewing the screener containing 19 high quality undiscovered gems. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include EHC. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Interested in Encompass Health Corporation? Here are five stocks we like better. Strong second-quarter performance prompted higher 2026 guidance: Revenue rose 9.6%, adjusted EBITDA increased 9.2% to $348 million, and adjusted EPS grew 10.7%, supported by higher discharges and patient acuity. Encompass now expects $6.41 billion–$6.49 billion in revenue and adjusted EPS of $6.02–$6.25. Encompass is accelerating capacity expansion amid strong demand. The company opened two hospitals and added beds in the second quarter, with five more hospitals and 100–150 additional beds planned for the rest of 2026; occupancy reached 77.4%, up 290 basis points year over year. Capital returns and strategic opportunities remain key priorities: Encompass repurchased $74.2 million of stock, raised its quarterly dividend to $0.21 per share, and increased authorization to $1 billion. North Carolina’s repeal of inpatient rehabilitation certificate-of-need rules could support six to 10 new facilities annually beginning in 2029. 3 Healthcare Stocks With Fresh Dividend Hikes and Different Income Profiles Encompass Health (NYSE:EHC) reported second-quarter 2026 results marked by revenue, earnings and discharge growth, prompting the inpatient rehabilitation provider to raise its full-year outlook. Revenue increased 9.6% from the prior-year quarter, while adjusted EBITDA rose 9.2% to $348 million and adjusted earnings per share increased 10.7%, President and Chief Executive Officer Mark Tarr said on the company’s earnings call. The revenue increase reflected 5.6% discharge growth and a 3.9% increase in net revenue per discharge, according to Executive Vice President and Chief Financial Officer Doug Coltharp. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Healthcare Added 35,200 Jobs—3 Stocks Positioned to Benefit Coltharp said the increase in net revenue per discharge was driven by higher patient acuity, including growth in medically complex categories such as stroke and brain injury. Same-store stroke volume rose 5.5%, while same-store brain injury volume increased 3.9%. Total growth in those categories was 7.9% and 8.0%, respectively. Knee and hip replacement volume increased about 1% during the quarter. The company raised its full-year 2026 outlook and now expects net operating revenue of $6.41 billion to $6.49 billion, adjusted EBITDA of $1.365 billion to $1.395 billion, and adjusted EPS of $6.02 to $6.25. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling More Than Yield: 5 Stocks Beating the Market and Hiking Dividends The updated outlook incorporates an estimated 2.3% increase in net revenue per Medicare discharge beginning Oct. 1, based on the 2027 inpatient rehabilitation facility final rule issued by the Centers for Medicare & Medicaid Services on July 30. The company expects the rule’s Medicare pricing impact in the fourth quarter to be approximately 2.3%. Encompass also revised its assumptions for salaries, wages and benefits per full-time equivalent employee, now expecting growth of 3.5% to 4.0% for 2026. Coltharp said the increase reflects greater participation in nursing and therapy career ladder programs, although the company expects the investments to support retention, quality and lower reliance on premium labor. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Premium labor costs declined $2.6 million year over year to $25 million in the quarter. Contract labor represented 1.1% of total FTEs, improving 20 basis points from the second quarter of 2025. The company has recorded 11 consecutive quarters of year-over-year declines in premium labor costs, Coltharp said. However, Encompass reduced its expected 2026 net provider-tax benefit to adjusted EBITDA to approximately $10 million, from a prior expectation of roughly $21 million. The change stemmed primarily from retroactive adjustments related to the 2025 Florida Medicaid program. Demand for inpatient rehabilitation services remained strong, Tarr said. During the second quarter, Encompass opened a 50-bed hospital in Concordville, Pennsylvania, and a 40-bed hospital in Loganville, Georgia. The Loganville facility is the company’s eighth joint venture with Piedmont. It also added 10 beds at existing hospitals. Through the first half of 2026, the company opened three hospitals totaling 139 beds and added 54 beds at existing facilities. It plans to open another five hospitals with 250 total beds during the remainder of the year and add between 100 and 150 beds to existing hospitals. Encompass’ announced development pipeline beyond 2026 includes 13 hospitals and 606 beds. Management said it expects to announce additional projects, including smaller-format hospitals, later this year. Systemwide occupancy was 77.4% in the second quarter, up 290 basis points from a year earlier. The company had 60 hospitals with occupancy above 90%, averaging 94% occupancy. About 90% of planned bed additions for the second half of 2026 and first half of 2027 are slated for hospitals in that highly occupied group. New hospitals have generally reached four-wall positive EBITDA by month six and occupancy above 70% by month 10, Coltharp said. The company has lowered the occupancy threshold at which it begins evaluating bed expansions to 70% to 75%, compared with its historical range of 80% to 85%. North Carolina repealed its certificate-of-need law for inpatient rehabilitation care effective Oct. 1. Encompass currently operates one hospital in the state and has identified 15 priority markets after conducting a market-by-market review. The company has three real-estate parcels under contract and expects its next North Carolina hospital opening in late 2028 or early 2029. Management said the state could move the company toward the upper end of its target to open six to 10 new facilities annually beginning in 2029. The opportunity may also include a hub-and-spoke approach combining traditional hospitals and small-format facilities. During the quarter, Encompass repurchased about 704,000 shares for $74.2 million, bringing year-to-date repurchases to approximately 1.41 million shares for $145.8 million. The company also increased its quarterly dividend to $0.21 per share, payable in October, and raised its share repurchase authorization to $1 billion. The company issued $500 million of 5.875% senior notes due 2034 during the quarter and used most of the proceeds to redeem $400 million of 4.5% senior notes due 2028. Net leverage stood at 1.9 times at quarter-end. Management said Medicare Advantage preauthorization denials remained a challenge, despite marginal improvement from the fourth quarter of 2025 and first quarter of 2026. Encompass has been piloting an “admit and appeal” program across nine hospital markets since late February. Through July, the company had admitted 298 patients under the program. Of 144 cases that had been fully adjudicated, Encompass prevailed in 128 cases, an 89% success rate. Chief Operating Officer Pat Tuer said the company may initially expand the effort for diagnoses where results have been strongest, including potentially stroke patients, before considering a broader rollout by year-end. The company also cited improvement in clinical turnover. Annualized nursing turnover was about 19%, the lowest level in more than 12 years, while therapy turnover was just above 7%, the lowest in five years. Tuer said 43% of eligible registered nurses and certified nurses participate in the company’s career ladder programs, and turnover among ladder participants was approximately 5%. Encompass Health Corporation is a leading provider of post‐acute healthcare services in the United States, operating a comprehensive network of inpatient rehabilitation hospitals and home health and hospice agencies. Its inpatient rehabilitation hospitals offer intensive therapy programs for patients recovering from conditions such as stroke, brain injury, spinal cord injury, cardiac and pulmonary disorders, and orthopedic procedures. Through its home health segment, Encompass Health delivers skilled nursing, physical therapy, occupational therapy and speech therapy to patients in the comfort of their homes, while its hospice services provide end‐of‐life care focused on symptom management and emotional support for patients and families. Founded in 1984 as HealthSouth Corporation and rebranded as Encompass Health in 2018, the company has grown organically and through acquisitions to serve patients across more than 30 states. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Encompass Health Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Encompass Health Corporation EHC reported second-quarter adjusted earnings per share (EPS) of $1.55, which beat the Zacks Consensus Estimate by 4.7%. The bottom line increased 10.7% year over year. Net operating revenues of $1.6 billion improved 9.6% year over year. The top line marginally beat the consensus mark by 1.5%. The robust results were primarily driven by strong growth in net patient revenue per discharge, supported by solid discharge volumes and contributions from capacity expansion. However, the upside was partly offset by elevated operating expenses, particularly higher salaries, benefits, and general and administrative costs. Encompass Health Corporation price-consensus-eps-surprise-chart | Encompass Health Corporation Quote EHC’s net patient revenue per discharge rose 3.9% year over year and beat the Zacks Consensus Estimate by 2.1%. Total discharges grew 5.6% year over year to 68,895, but missed the consensus estimate by 0.2%. Total operating expenses of $1.3 billion escalated 9.2% year over year due to elevated salaries, benefits, other operating and general & administrative expenses. The figure marginally missed our estimate by 0.9%. Net income climbed 12.2% year over year to $207.4 million in the second quarter. Adjusted EBITDA of $348 million grew 9.2% year over year and surpassed our estimate of $330.2 million. In the first half, Encompass Health opened three new hospitals with beds totaling 139 and added 54 beds across its existing hospitals. Encompass Health exited the second quarter with cash and cash equivalents of $107.7 million, which rose 49.2% from the 2025-end level. Total assets of $7.5 billion increased 5.2% from the 2025-end level. Long-term debt, net of the current portion, amounted to $2.6 billion, which increased 6.2% from that recorded as of Dec. 31, 2025. The current portion of long-term debt totaled $35.9 million. Total shareholders’ equity of $3.4 billion improved 5.8% from the 2025-end figure. EHC generated $595.7 million of net cash from operations in the first half, which improved 6.6% from the prior-year figure. Adjusted free cash flow decreased 9.2% to $370.8 million for the period. Encompass Health bought back 0.7 million shares worth $74.2 million in the second quarter of 2026. As of June 30, 2026, the company had a leftover capacity of around $188 million under its buyback authorization. On July 23, 2026, Encompass Health increased the aggregate common stock repurchase authorization to $1 billion. Management paid out a quarterly cash dividend of 19 cents per share. Net operating revenues are now expected to be between $6.41 billion and $6.49 billion, up from the earlier projection of $6.375-$6.475 billion. This reflected growth over the 2025 reported figure of $5.94 billion. Adjusted EBITDA is now expected to range between $1.365 billion and $1.395 billion, up from $1.27 billion in 2025. The prior guidance was $1.35-$1.38 billion for the metric. Adjusted EPS from continuing operations is projected to be between $6.02 and $6.25, reflecting an increase from $5.45 in 2025. The earlier guidance for the metric was $5.89-$6.11. Adjusted free cash flow is presently forecasted to be in the range of $760-$865 million. Maintenance CAPEX is expected to remain in the range of $225-$240 million. The company still expects to open eight de novo hospitals, adding a total of 389 beds. It plans to add 150 to 200 beds to its existing hospitals. Over the 2023-2027 period, management still aims to inaugurate six to 10 de novos each year, as well as make bed additions in the range of 80-120 every year. It also expects a CAGR of 6-8% in discharges in the same time frame. It also expects to open freestanding hospitals, including remote and satellite locations, with more than 30 beds beginning in 2026. EHC currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Here are some stocks from the broader Medical space that have also reported their quarterly results: Tenet Healthcare Corporation THC, Elevance Health, Inc. ELV and Pediatrix Medical Group, Inc. MD. Here's how they have performed: Tenet Healthcare reported second-quarter 2026 adjusted earnings per share of $6.12, which surpassed the Zacks Consensus Estimate by 50%. The bottom line increased 52.2% year over year. THC’s net operating revenues advanced 6.8% year over year to $5.63 billion. The quarterly results were driven by strong same-facility revenue growth, higher patient acuity, disciplined expense management and higher Medicaid supplemental revenues. However, the gains were partly offset by an unfavorable payer mix due to lower exchange admissions. Elevance Health reported second-quarter 2026 adjusted earnings per share of $7.45, which surpassed the Zacks Consensus Estimate by 20.6%. However, the bottom line declined 15.7% year over year. Operating revenues advanced 0.8% year over year to $49.8 billion. ELV’s quarterly results were primarily driven by higher premium yields in the Health Benefits segment and increased CarelonRx product revenues. The gains were partly offset by a decline in overall medical membership and higher operating expenses. Pediatrix Medical reported second-quarter 2026 adjusted earnings per share of 63 cents, which beat the Zacks Consensus Estimate by 10.5%. The bottom line increased 18.9% year over year. Net revenues increased 4.1% year over year to $487.8 million. MD’s strong performance was driven by improved cash collection activity and a favorable payor mix, along with contributions from recent acquisitions. However, these gains were partly offset by lower patient volumes and higher operating costs. 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 Tenet Healthcare Corporation (THC) : Free Stock Analysis Report Pediatrix Medical Group, Inc. (MD) : Free Stock Analysis Report Elevance Health, Inc. (ELV) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Encompass Health (EHC) came out with quarterly earnings of $1.55 per share, beating the Zacks Consensus Estimate of $1.48 per share. This compares to earnings of $1.4 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +4.73%. A quarter ago, it was expected that this rehabilitation hospital operator would post earnings of $1.51 per share when it actually produced earnings of $1.6, delivering a surprise of +5.96%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Encompass Health, which belongs to the Zacks Medical - Outpatient and Home Healthcare industry, posted revenues of $1.6 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 1.52%. This compares to year-ago revenues of $1.46 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Encompass Health shares have added about 4.1% since the beginning of the year versus the S&P 500's gain of 13%. While Encompass Health has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Encompass Health was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.39 on $1.6 billion in revenues for the coming quarter and $5.96 on $6.43 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Medical - Outpatient and Home Healthcare is currently in the top 41% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, RadNet (RDNT), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 10. This operator of medical diagnostic imaging centers is expected to post quarterly earnings of $0.18 per share in its upcoming report, which represents a year-over-year change of -41.9%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. RadNet's revenues are expected to be $611.91 million, up 22.8% from the year-ago quarter. 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 RadNet, Inc. (RDNT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research