Encompass Health Corporation EHC reported first-quarter 2025 adjusted earnings per share (EPS) of $1.37, which outpaced the Zacks Consensus Estimate by 15.1%. The bottom line advanced 22.3% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Its shares gained 11.8% on April 25. The quarterly results were aided by strong net patient revenue per discharge and capacity expansion measures, with 25 beds added to existing hospitals and a new de novo hospital opened. A hiked 2025 EPS view may have also favored investors’ sentiment surrounding the stock. However, the upside was partly offset by an elevated operating expense level due to increased salaries, benefits and other operating costs.
Net operating revenues rose 10.6% year over year to $1.5 billion. The top line beat the consensus mark by 1.3%.
Encompass Health Corporation Price, Consensus and EPS Surprise
Encompass Health Corporation Price, Consensus and EPS Surprise
Encompass Health Corporation price-consensus-eps-surprise-chart | Encompass Health Corporation Quote
Q1 Operations
EHC’s net patient revenue per discharge grew 3.9% year over year, which surpassed our growth estimate of 1.4%. Total discharges were 64,985, which improved 6.3% year over year. The metric fell short of the consensus mark of 65,241.2 and our estimate of 65,463.
Total operating expenses of $1.19 billion increased 7.2% year over year due to higher salaries and benefits, and other operating expenses. The metric came lower than our estimate of $1.2 billion.
Net and comprehensive income advanced 41.6% year over year to $196.5 million in the first quarter.
Adjusted EBITDA of $313.6 million improved 14.9% year over year, which outpaced our estimate of $296 million.
Encompass Health added 25 beds to its existing hospitals in the quarter under review and inaugurated one de novo hospital.
Financial Update (as of March 31, 2025)
Encompass Health exited the first quarter with cash and cash equivalents of $95.8 million, which increased 12.2% from the figure at 2024-end.
Total assets of $6.6 billion inched up 1.6% from the 2024-end level.
Long-term debt, net of the current portion, amounted to $2.3 billion, down 1.1% from the figure as of Dec. 31, 2024. The current portion of long-term debt totaled $138.7 million.
Total shareholders’ equity of $2.9 billion advanced 3.2% from the 2024-end figure.
EHC generated $288.6 million of net cash from operations in the first quarter, which climbed 20.9% year over year. Adjusted free cash of $222.4 million soared 32.7% year over year.
Capital Deployment Update
Encompass Health bought back shares worth $32.1 million in the quarter under review. As of March 31, 2025, the company had a leftover capacity of around $458 million under its buyback authorization.
Management paid out a quarterly cash dividend of 17 cents per share.
2025 Outlook Updated
Net operating revenues are currently forecasted to be between $5.85 billion and $5.925 billion, higher than the earlier view of $5.8-$5.9 billion. The midpoint of the revised guidance implies a 9.6% rise from the 2024 figure.
Adjusted EBITDA is estimated to be between $1.185 billion and $1.22 billion, up from the prior guidance of $1.16-$1.2 billion. The midpoint of the updated guidance indicates 9% growth from the 2024 figure.
Adjusted EPS from continuing operations is expected to be between $4.85 and $5.10, higher than the prior view of $4.67-$4.96. The midpoint of the revised outlook suggests 12.3% growth from the 2024 figure.
Adjusted free cash flow is presently forecasted within $620-$715 million, up from the earlier guidance of $590-$690 million. Maintenance capex continues to be expected in the range of $215-$225 million.
The company reiterated its aim to open seven de novo hospitals, adding 340 beds, and a 50-bed satellite hospital. In 2025, it also expects to add 100-120 beds to existing hospitals.
Growth Targets Reaffirmed
Over the 2023-2027 period, management aims to inaugurate six to 10 de novos each year, as well as make bed additions in the range of 80-120 each year. It also expects a CAGR of 6-8% in discharges in the same time frame.
EHC’s Zacks Rank
Encompass Health currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported first-quarter 2025 results so far, the bottom-line results of Elevance Health, Inc. ELV, Centene Corporation CNC and HCA Healthcare, Inc. HCA beat the respective Zacks Consensus Estimate.
Elevance Health reported first-quarter 2025 adjusted EPS of $11.97, which surpassed the Zacks Consensus Estimate by 6.8%. The bottom line increased 10.5% year over year. Operating revenues of $48.8 billion rose 15.4% year over year. Moreover, the top line beat the consensus mark by 6%. Medical membership of Elevance Health was around 45.8 million as of March 31, 2025, which slipped 0.5% year over year. Premiums increased 14.5% year over year to $40.9 billion.
Product revenues of $5.8 billion increased 29.1% year over year. Net investment income rose 26.9% year over year to $590 million. The adjusted operating margin deteriorated 70 basis points (bps) year over year to 6.7%. The operating expense ratio improved 70 bps year over year to 10.9%. The benefit expense ratio of 86.4% deteriorated 80 bps year over year. In the Health Benefits segment, operating revenues totaled $41.4 billion, which increased 11.2% year over year. Operating gains declined 3.1% year over year to $2.22 billion.
Centene’s first-quarter 2025 adjusted EPS of $2.90 surpassed the Zacks Consensus Estimate by 22.9%. Moreover, the bottom line climbed 28% year over year. Revenues advanced 15.4% year over year to $46.6 billion. The top line beat the consensus mark by 7.2%. Revenues from Medicaid grew 4% year over year to $22.3 billion, while Medicare revenues of $8.8 billion soared 48% year over year in the quarter under review. Meanwhile, commercial revenues improved 31% year over year to $10.1 billion.
Centene's premiums totaled $41.7 billion, which advanced 17.4% year over year. Service revenues of $777 million decreased 3.8% year over year in the first quarter. Investment and other income dropped 29.9% year over year to $382 million. Total membership was 27.9 million as of March 31, 2025, which dipped 1.7% year over year. Centene’s health benefits ratio (HBR) of 87.5% deteriorated 40 bps year over year in the quarter under review. Adjusted net earnings improved 18.7% year over year to $1.4 billion.
HCA Healthcare reported first-quarter 2025 adjusted EPS of $6.45, which outpaced the Zacks Consensus Estimate of $5.77. The bottom line advanced 20.3% year over year. Revenues rose 5.7% year over year to $18.3 billion. The top line beat the consensus mark by 0.1%. Same-facility equivalent admissions improved 2.6% year over year in the first quarter, while same-facility admissions advanced 2.8% year over year. Same-facility revenue per equivalent admission grew 2.9% year over year.
Same-facility inpatient surgeries increased 0.2% year over year. Same-facility outpatient surgeries dipped 2.1% year over year. Additionally, same-facility emergency room visits rose 4% year over year in the first quarter. Adjusted EBITDA of $3.7 billion increased from the year-ago figure of $3.4 billion. HCA Healthcare operated 192 hospitals and roughly 2,500 ambulatory sites of care across 20 states and the United Kingdom as of March 31, 2025.
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