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Encompass Health's (EHC) Q3 Earnings Beat on Discharge Growth
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Encompass Health Corporation (EHC - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 86 cents, which surpassed the Zacks Consensus Estimate by 11.7%. The bottom line advanced 28.4% year over year.
Net operating revenues rose 10.8% year over year to $1,206.9 million in the quarter under review. The top line beat the consensus mark by a whisker.
The quarterly results were aided by improved patient volumes, higher net patient revenue per discharge and strong discharge growth. Nevertheless, the upside was partly offset by escalating salaries and benefits expenses.
Encompass Health Corporation Price, Consensus and EPS Surprise
Net patient revenue per discharge of Encompass Health improved 3.3% year over year in the third quarter, higher than our growth estimate of 2.5%. The metric benefited on the back of price increases. Total discharges increased 7.3% year over year, which came higher than our growth estimate of 6.4%.
Total operating expenses of $1,027.5 million escalated 9.2% year over year and came higher than our estimate of $1,013.9 million. The increase was due to higher salaries and benefits and, other operating expenses.
EHC reported net and comprehensive income of $113.4 million, which soared 69.3% year over year.
Adjusted EBITDA was $237.5 million, which rose 21.6% year over year in the third quarter and surpassed our estimate of $227 million. The improvement can be attributed to a rise in revenues as well as lower contract labor expenses and, sign-on and shift bonuses.
Encompass Health added 26 beds to its existing hospitals in the quarter under review.
Financial Update (as of Sep 30, 2023)
Encompass Health exited the third quarter with cash and cash equivalents of $99.7 million, which increased nearly five-fold from the 2022-end level. Total assets of $5,964.3 million increased 5.8% from the figure at 2022 end.
Long-term debt, net of the current portion, was $2,692.7 million. The figure slid 1.8% from the figure as of Dec 31, 2022. The current portion of long-term debt amounted to $23.9 million.
Total shareholders’ equity climbed 17.6% from the 2022-end figure to $2,147.7 million.
EHC generated $215.2 million of net cash from operations in the quarter under review, which increased more than three-fold year over year. Adjusted free cash flows were recorded at $149.3 million, which increased nearly six-fold year over year.
Capital Deployment Update
Encompass Health did not buy back shares in the third quarter. The company had a leftover capacity of around $198 million under its buyback authorization as of Sep 30, 2023.
Management paid out a quarterly cash dividend of 15 cents per share.
2023 Outlook Updated
Net operating revenues are currently anticipated to lie between $4,770 million and $4,800 million compared with the prior guidance of $4,750-$4,810 million. The midpoint of the updated guidance suggests 10% growth from the 2022 reported figure.
Adjusted EBITDA is projected to be within $940-$955 million for this year, higher than the earlier view of $920-$950 million. The midpoint of the revised outlook implies an improvement of 15.6% from the 2022 figure.
Adjusted EPS from continuing operations is estimated to lie in the $3.41-$3.52 band compared with the previous outlook of $3.31-$3.53. The midpoint of the updated view indicates a 21.6% rise from the 2022 figure.
Adjusted free cash flow is expected to be between $445 million and $500 million for 2023. Maintenance capex is anticipated within $210-$220 million.
Growth Targets
Management targets to open six to ten de novos each year during the 2023-2027 period. It aims to make bed additions in the range of 80-120 each year as well as bring about a CAGR of 6-8% in discharges in the same time frame.
Of the Medical sector players that have reported third-quarter 2023 results so far, the bottom-line results of Molina Healthcare, Inc. (MOH - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Universal Health Services, Inc. (UHS - Free Report) beat the respective Zacks Consensus Estimate.
Molina Healthcare reported third-quarter 2023 adjusted EPS of $5.05, which outpaced the Zacks Consensus Estimate by 3.7%. The bottom line advanced 16% year over year. Total revenues rose 7.8% year over year to $8,548 million in the quarter under review. Also, the top line surpassed the consensus mark by 2.9%. MOH’s premium revenues amounted to $8,240 million, which grew 8% year over year. It reported an adjusted net income of $294 million, which advanced 15.7% year over year in the third quarter. The consolidated medical care ratio (medical costs as a percentage of premium revenues) deteriorated 30 bps year over year to 88.7%. Total membership was around 5.2 million as of Sep 30, 2023, which inched up 1% year over year.
Elevance Health reported third-quarter 2023 adjusted net income of $8.99 per share, which surpassed the Zacks Consensus Estimate by 6.4%. The bottom line climbed 20.5% year over year. Operating revenues rose 7.2% year over year to $42.5 billion in the quarter under review. Yet, the top line missed the consensus mark by a whisker. As of Sep 30, 2023, ELV’s medical membership was around 47.3 million, which inched up 0.1% year over year in the third quarter. Operating revenues of the Carelon segment improved 14.3% year over year to $11.9 billion. The unit’s operating gain inched up 1.4% year over year to $650 million in the third quarter.
Universal Health reported third-quarter 2023 adjusted EPS of $2.55, which beat the Zacks Consensus Estimate by 9%. The bottom line climbed a penny from the year-ago period. Net revenues amounted to $3.6 billion in the quarter under review, which rose from $3.3 billion a year ago. The top line outpaced the consensus mark by 0.9%. UHS’s adjusted EBITDA net of NCI declined 1.5% year over year to $421.5 million in the third quarter. In the quarter, adjusted admissions (adjusted for outpatient activity) in the Acute Care Hospital Services segment advanced 6.8% year over year on a same-facility basis. Adjusted patient days rose 3.8% year over year.
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Encompass Health's (EHC) Q3 Earnings Beat on Discharge Growth
Encompass Health Corporation (EHC - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 86 cents, which surpassed the Zacks Consensus Estimate by 11.7%. The bottom line advanced 28.4% year over year.
Net operating revenues rose 10.8% year over year to $1,206.9 million in the quarter under review. The top line beat the consensus mark by a whisker.
The quarterly results were aided by improved patient volumes, higher net patient revenue per discharge and strong discharge growth. Nevertheless, the upside was partly offset by escalating salaries and benefits expenses.
Encompass Health Corporation Price, Consensus and EPS Surprise
Encompass Health Corporation price-consensus-eps-surprise-chart | Encompass Health Corporation Quote
Q3 Operations
Net patient revenue per discharge of Encompass Health improved 3.3% year over year in the third quarter, higher than our growth estimate of 2.5%. The metric benefited on the back of price increases. Total discharges increased 7.3% year over year, which came higher than our growth estimate of 6.4%.
Total operating expenses of $1,027.5 million escalated 9.2% year over year and came higher than our estimate of $1,013.9 million. The increase was due to higher salaries and benefits and, other operating expenses.
EHC reported net and comprehensive income of $113.4 million, which soared 69.3% year over year.
Adjusted EBITDA was $237.5 million, which rose 21.6% year over year in the third quarter and surpassed our estimate of $227 million. The improvement can be attributed to a rise in revenues as well as lower contract labor expenses and, sign-on and shift bonuses.
Encompass Health added 26 beds to its existing hospitals in the quarter under review.
Financial Update (as of Sep 30, 2023)
Encompass Health exited the third quarter with cash and cash equivalents of $99.7 million, which increased nearly five-fold from the 2022-end level. Total assets of $5,964.3 million increased 5.8% from the figure at 2022 end.
Long-term debt, net of the current portion, was $2,692.7 million. The figure slid 1.8% from the figure as of Dec 31, 2022. The current portion of long-term debt amounted to $23.9 million.
Total shareholders’ equity climbed 17.6% from the 2022-end figure to $2,147.7 million.
EHC generated $215.2 million of net cash from operations in the quarter under review, which increased more than three-fold year over year. Adjusted free cash flows were recorded at $149.3 million, which increased nearly six-fold year over year.
Capital Deployment Update
Encompass Health did not buy back shares in the third quarter. The company had a leftover capacity of around $198 million under its buyback authorization as of Sep 30, 2023.
Management paid out a quarterly cash dividend of 15 cents per share.
2023 Outlook Updated
Net operating revenues are currently anticipated to lie between $4,770 million and $4,800 million compared with the prior guidance of $4,750-$4,810 million. The midpoint of the updated guidance suggests 10% growth from the 2022 reported figure.
Adjusted EBITDA is projected to be within $940-$955 million for this year, higher than the earlier view of $920-$950 million. The midpoint of the revised outlook implies an improvement of 15.6% from the 2022 figure.
Adjusted EPS from continuing operations is estimated to lie in the $3.41-$3.52 band compared with the previous outlook of $3.31-$3.53. The midpoint of the updated view indicates a 21.6% rise from the 2022 figure.
Adjusted free cash flow is expected to be between $445 million and $500 million for 2023. Maintenance capex is anticipated within $210-$220 million.
Growth Targets
Management targets to open six to ten de novos each year during the 2023-2027 period. It aims to make bed additions in the range of 80-120 each year as well as bring about a CAGR of 6-8% in discharges in the same time frame.
Zacks Rank
Encompass Health currently carries a Zacks Rank #3 (Hold). 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 third-quarter 2023 results so far, the bottom-line results of Molina Healthcare, Inc. (MOH - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Universal Health Services, Inc. (UHS - Free Report) beat the respective Zacks Consensus Estimate.
Molina Healthcare reported third-quarter 2023 adjusted EPS of $5.05, which outpaced the Zacks Consensus Estimate by 3.7%. The bottom line advanced 16% year over year. Total revenues rose 7.8% year over year to $8,548 million in the quarter under review. Also, the top line surpassed the consensus mark by 2.9%. MOH’s premium revenues amounted to $8,240 million, which grew 8% year over year. It reported an adjusted net income of $294 million, which advanced 15.7% year over year in the third quarter. The consolidated medical care ratio (medical costs as a percentage of premium revenues) deteriorated 30 bps year over year to 88.7%. Total membership was around 5.2 million as of Sep 30, 2023, which inched up 1% year over year.
Elevance Health reported third-quarter 2023 adjusted net income of $8.99 per share, which surpassed the Zacks Consensus Estimate by 6.4%. The bottom line climbed 20.5% year over year. Operating revenues rose 7.2% year over year to $42.5 billion in the quarter under review. Yet, the top line missed the consensus mark by a whisker. As of Sep 30, 2023, ELV’s medical membership was around 47.3 million, which inched up 0.1% year over year in the third quarter. Operating revenues of the Carelon segment improved 14.3% year over year to $11.9 billion. The unit’s operating gain inched up 1.4% year over year to $650 million in the third quarter.
Universal Health reported third-quarter 2023 adjusted EPS of $2.55, which beat the Zacks Consensus Estimate by 9%. The bottom line climbed a penny from the year-ago period. Net revenues amounted to $3.6 billion in the quarter under review, which rose from $3.3 billion a year ago. The top line outpaced the consensus mark by 0.9%. UHS’s adjusted EBITDA net of NCI declined 1.5% year over year to $421.5 million in the third quarter. In the quarter, adjusted admissions (adjusted for outpatient activity) in the Acute Care Hospital Services segment advanced 6.8% year over year on a same-facility basis. Adjusted patient days rose 3.8% year over year.