Encompass Health Q4 Earnings Beat but Discharges Lag

Encompass Health Corporation price-consensus-eps-surprise-chart | Encompass Health Corporation Quote

Q4 Operations

EHC’s net patient revenue per discharge rose 4.1% year over year and beat the Zacks Consensus Estimate by 1%. Total discharges grew 5.3% year over year to 67,238, but marginally missed the consensus estimate by 0.3%.

Total operating expenses of $1.26 billion escalated 7.5% year over year due to elevated salaries, benefits, other operating and general & administrative expenses. This was marginally below our estimate of $1.28 billion.

Net income climbed 23.7% year over year to $203.1 million in the fourth quarter.

Adjusted EBITDA of $335.6 million grew 15.9% year over year and surpassed our estimate of $304 million.  

In the fourth quarter, Encompass Health added 37 beds to its existing hospitals and inaugurated three de novo hospitals.

Financial Update (as of Dec. 31, 2025)

Encompass Health exited the fourth quarter with cash and cash equivalents of $72.2 million, which declined 15.5% from the 2024-end level.

Total assets of $7.1 billion increased 8.5% year over year.

Long-term debt, net of the current portion, amounted to $2.4 billion, which increased 3.7% from the figure as of Dec. 31, 2024. The current portion of long-term debt totaled $43.6 million.

Total shareholders’ equity of $3.2 billion improved 15.2% from the 2024-end figure.

EHC generated $346 million of net cash from operations in the fourth quarter, which improved 24.1% from the prior-year figure. Adjusted free cash flow rose 23.6% to $235.4 million for the same period.

Capital Deployment Update

Encompass Health bought back shares worth $158 million in 2025. As of Dec. 31, 2025, the company had a leftover capacity of around $332 million under its buyback authorization.

Management paid out a quarterly cash dividend of 19 cents per share.

Full-Year Update

Encompass Health reported 2025 operating revenues of $5.94 billion, up from $5.37 billion a year ago. Full-year adjusted net income was $5.45 per share, up from $4.43 a year ago.  Adjusted EBITDA of $1.3 billion rose from $1.1 billion a year earlier. The company added 127 beds in 2025 to its existing hospitals.

2026 Outlook

Net operating revenues are currently anticipated to be between $6.365 billion and $6.465 billion, indicating an improvement from the 2025 reported figure of $5.94 billion (up from $5.37 billion in 2024).

Adjusted EBITDA is anticipated to be between $1.34 billion and $1.38 billion, indicating growth from the 2025 figure of $1.27 billion (up from $1.10 billion in 2024).

Adjusted EPS from continuing operations is expected to be between $5.81 and $6.10, implying a rise from the 2025 figure of $5.45 (up from $4.43 in 2024).

Adjusted free cash flow is estimated to be between $765 million and $890 million compared with $817.9 million in 2025. Maintenance capex is anticipated to be in the range of $225-$240 million.

The company expects to open eight de novo hospitals, adding a total of 389 beds. It plans to add approximately 175 beds to its existing hospitals. It also expects to open freestanding hospitals, including remote and satellite locations, with more than 30 beds beginning in 2026.

Growth Targets Reaffirmed

Over the 2023-2027 period, management aims to inaugurate six to ten 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.

Zacks Rank

Encompass Health currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medical Sector Releases

Companies belonging to the broader Medical space, such as HCA Healthcare, Inc. HCA, Elevance Health, Inc. ELV and The Ensign Group, Inc. ENSG, have also reported results for the December quarter.  Here’s how they have performed:

HCA Healthcare reported fourth-quarter 2025 adjusted EPS of $8.01, which outpaced the Zacks Consensus Estimate by 8.8% on the back of strong admissions. Modest gains in emergency room visits and a rise in revenue per equivalent admission also supported performance. However, the upside was partly offset by HCA Healthcare’s elevated operating expenses.

Elevance Health reported fourth-quarter 2025 adjusted EPS of $3.33, which surpassed the Zacks Consensus Estimate by 7.3% on the back of strong growth in premiums. Segment-wise, the Carelon division posted a robust revenue surge, aided by buyout and scaling risk-based services, while Health Benefits saw increased premium yields and Medicare Advantage membership growth. However, the upside was partly offset by a decline in Elevance Health’s overall medical membership and an elevated expense level.

The Ensign Group reported fourth-quarter 2025 adjusted earnings per share of $1.82, which beat the Zacks Consensus Estimate by 4% on the back of improved occupancy rates, higher patient days and stronger skilled services performance. However, the positives were partly offset by higher expenses. The bottom line increased 19.5% year over year. ENSG’s revenues rose 20.2% year over year to $1.36 billion but marginally missed the Zacks Consensus Estimate by 0.5%.