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Encompass Health (EHC) Up 7.9% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Encompass Health (EHC - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Encompass Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Encompass Health Q1 Earnings Meet & Revenues Miss
Encompass Health Corp.’s earnings of 87 cents per share met the Zacks Consensus Estimate but declined 16.3% year over year.
This year-over-year downside was because of a rise in expenses that outpaced the uptick in revenues.
Revenues of $1.18 billion missed the Zacks Consensus Estimate by 1.69% but grew 5.2% year over year. Top-line growth was driven by volume and pricing growth in the inpatient rehabilitation segment and volume growth in the home health and hospice segment.
Adjusted EBITDA of $228 million was down 6.1% year over year.
Segment Results
Inpatient rehabilitation segment’s revenues of $909.2 million were up 4.5% year over year, driven by 5% higher revenues from Inpatient business, partly offset by 14.7% decline in revenues from Outpatient and other business. Adjusted EBITDA of $215.5 million decreased 6.3% year over year due to revenue growth.
Home Health and Hospice segment’s revenues of $272.8 million were up 7.4% year over year, driven by a respective increase of 2.4% and 39.5% in the Home Health and Hospice sub-segments.
Adjusted EBITDA of $41 million was down 11.4% year over year due to lower reimbursement rates under PDGM, increased salaries, and wages and higher administrative costs.
2020 Guidance Update
Given the fast-shifting operating conditions post the COVID-19 pandemic outbreak, the company cannot precisely estimate the effects that the health hazard may have on its full-year financial results. As a result, the company withdrew its 2020 guidance and five-year growth targets.
Financial Update
During the quarter, free cash flow of $74.6 million declined 41.6% year over year.
As of Mar 31, 2020, the company had almost $105 million in cash and roughly $613 million available to it under its $1 billion revolving credit facility. It does not face any near-term refinancing risk as the amounts outstanding under its credit agreement do not mature until 2024 and its bonds all mature in 2023 and beyond. The company's leverage ratio at the end of the first quarter of 2020 was 3.5X.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -49.62% due to these changes.
VGM Scores
Currently, Encompass Health has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Encompass Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Encompass Health (EHC) Up 7.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Encompass Health (EHC - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Encompass Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Encompass Health Q1 Earnings Meet & Revenues Miss
Encompass Health Corp.’s earnings of 87 cents per share met the Zacks Consensus Estimate but declined 16.3% year over year.
This year-over-year downside was because of a rise in expenses that outpaced the uptick in revenues.
Revenues of $1.18 billion missed the Zacks Consensus Estimate by 1.69% but grew 5.2% year over year. Top-line growth was driven by volume and pricing growth in the inpatient rehabilitation segment and volume growth in the home health and hospice segment.
Adjusted EBITDA of $228 million was down 6.1% year over year.
Segment Results
Inpatient rehabilitation segment’s revenues of $909.2 million were up 4.5% year over year, driven by 5% higher revenues from Inpatient business, partly offset by 14.7% decline in revenues from Outpatient and other business.
Adjusted EBITDA of $215.5 million decreased 6.3% year over year due to revenue growth.
Home Health and Hospice segment’s revenues of $272.8 million were up 7.4% year over year, driven by a respective increase of 2.4% and 39.5% in the Home Health and Hospice sub-segments.
Adjusted EBITDA of $41 million was down 11.4% year over year due to lower reimbursement rates under PDGM, increased salaries, and wages and higher administrative costs.
2020 Guidance Update
Given the fast-shifting operating conditions post the COVID-19 pandemic outbreak, the company cannot precisely estimate the effects that the health hazard may have on its full-year financial results. As a result, the company withdrew its 2020 guidance and five-year growth targets.
Financial Update
During the quarter, free cash flow of $74.6 million declined 41.6% year over year.
As of Mar 31, 2020, the company had almost $105 million in cash and roughly $613 million available to it under its $1 billion revolving credit facility. It does not face any near-term refinancing risk as the amounts outstanding under its credit agreement do not mature until 2024 and its bonds all mature in 2023 and beyond. The company's leverage ratio at the end of the first quarter of 2020 was 3.5X.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -49.62% due to these changes.
VGM Scores
Currently, Encompass Health has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Encompass Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.