Shares of Encompass Health Corporation EHC have gained 59.9% in the past year compared with the industry’s 27.4% growth. The Medical sector and the S&P 500 composite index have returned 6.4% and 32.4%, respectively, in the same time frame. With a market capitalization of $10.4 billion, the average volume of shares traded in the last three months was 0.6 million.

Improved patient volumes, an extensive healthcare facility network and strong financial health continue to propel Encompass Health's growth.

The leading rehabilitation hospital operator, presently carrying a Zacks Rank #2 (Buy), boasts an impressive track record of beating estimates in each of the trailing four quarters, the average surprise being 13.59%. 

Return on equity in the trailing 12 months is currently pegged at 17.6%, which is higher than the industry’s average of 8.5%. This substantiates the company’s efficiency in utilizing shareholders’ funds.

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Can EHC Retain the Momentum?

The Zacks Consensus Estimate for EHC’s 2024 earnings is pegged at $4.28 per share, indicating an improvement of 17.6% from the year-earlier reading. The consensus estimate for revenues is $5.3 billion, implying a 11.2% increase from the prior-year actual. 

The consensus mark for 2025 earnings is pegged at $4.76 per share, indicating 11.2% growth from the 2024 estimate. The same for revenues stands at $5.8 billion, which indicates a rise of 8.9% from the 2024 estimate. 

Encompass Health’s revenue growth is largely driven by rising patient volumes, which is a key contributor to the top line for a healthcare facility operator. Increased discharge growth also contributes significantly to the company’s revenue expansion. Management targets a compound annual growth rate of 6-8% in discharges during the 2023-2027 period. Revenues improved 11.6% year over year in the first nine months of 2024. 

For 2024, management forecasts revenues to range between $5.325 billion and $5.375 billion, the midpoint of which implies 11.4% growth from the 2023 figure. The company’s sole operating unit, Inpatient Rehabilitation, is expected to continue delivering strong performance, supported by an aging U.S. population and sustained demand for rehabilitation services that aid individuals in resuming their daily activities.

Encompass Health actively pursues an expansion strategy, consistently announcing plans to open new inpatient rehabilitation hospitals in various U.S. communities. Between 2023 and 2027, the company intends to establish six to 10 de novo facilities annually and add 80 to 120 beds each year. Joint ventures with regional healthcare organizations allow it to effectively address diverse healthcare needs across different regions.

With a robust network of inpatient rehabilitation hospitals across the United States, Encompass Health continues to expand its presence. The recent opening of the Rehabilitation Hospital of Houston increased its nationwide hospital count to 166. 

Maintaining a strong financial position is critical for ongoing investments. The company demonstrates this through its growing cash reserves and solid cash flow generation abilities. As of Sept. 30, 2024, cash and cash equivalents amounted to $147.8 million, which more than doubled from the 2023-end level. Additionally, the company generated $724 million in operating cash flows during the first nine months of 2024, which advanced 11.4% from the prior-year comparable period.

Encompass Health boasts an impressive VGM Score of A. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.

Other Stocks to Consider

Some other top-ranked stocks in the Medical space are Masimo Corporation MASI, Inspire Medical Systems, Inc. INSP and Tenet Healthcare Corporation THC, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 17.10%. The Zacks Consensus Estimate for MASI’s 2024 earnings implies an improvement of 6.3% while the consensus mark for revenues indicates growth of 1.9% from the respective year-ago figures. 

The consensus estimate for MASI’s earnings has moved 3.9% north in the past 30 days. Shares of Masimo have gained 82.2% in the past year. 

Inspire Medical Systems’ earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 649.90%. The consensus estimate for INSP’s 2024 earnings is pegged at $1.33 per share. A loss of 72 cents per share was incurred in the prior year. The consensus mark for revenues implies an improvement of 27.4% from the year-ago reported figure. 

The consensus estimate for INSP’s earnings has moved 77.3% north in the past 30 days. Shares of Inspire Medical Systems have gained 34.6% in the past year. 

Tenet Healthcare’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 59.92%. The Zacks Consensus Estimate for THC’s 2024 earnings implies an improvement of 63%, while the consensus mark for revenues indicates growth of 1.1% from the respective year-ago figures. 

The Zacks Consensus Estimate for THC’s earnings has moved 6.8% north in the past 30 days. Shares of Tenet Healthcare have gained 114.1% in the past year.

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