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Encompass Health (EHC) Up 2.2% 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 2.2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Encompass Health Q1 Earnings Beat, Revenues Up Y/Y
Encompass Health reported first-quarter 2024 adjusted earnings per share (EPS) of $1.12, which outpaced the Zacks Consensus Estimate by 20.4%. The bottom line rose 27.3% year over year.
Net operating revenues amounted to $1.3 billion, which advanced 13.4% year over year in the quarter under review. The top line beat the consensus mark by 3.6%.
First-quarter results were supported by rising patient revenue, strong discharges and a robust pipeline for bed additions. The positives were partially offset by elevated operating expenses.
Q1 Operations
EHC’s net patient revenue per discharge grew 2.8% year over year in the first quarter, which was higher than our growth estimate of 1.6%. Total discharges of 61.1 million improved 10% year over year and surpassed our estimate of 59.6 million.
Total operating expenses increased 12.9% year over year to $1.11 billion, which was higher than our estimate of $1.08 billion. The metric witnessed a year-over-year rise due to elevated salaries and benefits and other operating expenses.
Net and comprehensive income of $138.8 million grew 22.5% year over year in the quarter under review.
Adjusted EBITDA advanced 19.2% year over year to $273 million, which beat our estimate of $253.5 million. Strong discharge growth provided an impetus to the performance of the metric.
Encompass Health added 51 beds to its existing hospitals in the first quarter.
Financial Update (as of Mar 31, 2024)
Encompass Health exited the first quarter with cash and cash equivalents of $134.4 million, which increased nearly one-fold from the 2023-end figure.
Total assets of $6.2 billion increased 2.1% from 2023-end.
Long-term debt, net of the current portion, amounted to $2.7 billion, down 0.2% from the figure as of Dec 31, 2023. The current portion of long-term debt totaled $25.6 million.
Total shareholders’ equity of $2.4 billion rose 4.7% from the 2023-end figure.
EHC generated net cash from operations of $238.8 million in the first quarter, which climbed 4.8% year over year. Adjusted free cash flow of $167.6 million increased 5.6% year over year.
Capital Deployment Update
Encompass Health did not buy back shares in the first quarter. The company had a leftover capacity of around $198 million under its buyback authorization as of Mar 31, 2024.
Management paid out a quarterly cash dividend of 15 cents per share.
2024 Outlook Revised
Net operating revenues are projected to be between $5.25 billion and $5.325 billion, the mid-point of which indicates an improvement of 10.2% from the 2023 reported figure of $4.8 billion.
Adjusted EBITDA is anticipated to be in the range of $1.030-$1.065 billion in 2024, the midpoint of which suggests 7.9% growth from the 2023 figure of $971.1 million.
Adjusted EPS from continuing operations is expected to stay within $3.86-$4.11, the mid-point of which implies a 9.5% rise from the 2023 figure of $3.64.
Adjusted free cash flow is estimated to lie between $475 million and $570 million for 2024. Maintenance capex is anticipated within $185-$195 million.
The company expects to open six de novo hospitals with a total addition of 280 beds. It also expects to add another 93 beds to existing hospitals, inclusive of a 40-bed freestanding hospital.
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 targets to bring about a CAGR of 6-8% in discharges in the same time frame.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Encompass Health has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 has been net zero. Notably, Encompass Health has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Encompass Health (EHC) Up 2.2% 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 2.2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Encompass Health Q1 Earnings Beat, Revenues Up Y/Y
Encompass Health reported first-quarter 2024 adjusted earnings per share (EPS) of $1.12, which outpaced the Zacks Consensus Estimate by 20.4%. The bottom line rose 27.3% year over year.
Net operating revenues amounted to $1.3 billion, which advanced 13.4% year over year in the quarter under review. The top line beat the consensus mark by 3.6%.
First-quarter results were supported by rising patient revenue, strong discharges and a robust pipeline for bed additions. The positives were partially offset by elevated operating expenses.
Q1 Operations
EHC’s net patient revenue per discharge grew 2.8% year over year in the first quarter, which was higher than our growth estimate of 1.6%. Total discharges of 61.1 million improved 10% year over year and surpassed our estimate of 59.6 million.
Total operating expenses increased 12.9% year over year to $1.11 billion, which was higher than our estimate of $1.08 billion. The metric witnessed a year-over-year rise due to elevated salaries and benefits and other operating expenses.
Net and comprehensive income of $138.8 million grew 22.5% year over year in the quarter under review.
Adjusted EBITDA advanced 19.2% year over year to $273 million, which beat our estimate of $253.5 million. Strong discharge growth provided an impetus to the performance of the metric.
Encompass Health added 51 beds to its existing hospitals in the first quarter.
Financial Update (as of Mar 31, 2024)
Encompass Health exited the first quarter with cash and cash equivalents of $134.4 million, which increased nearly one-fold from the 2023-end figure.
Total assets of $6.2 billion increased 2.1% from 2023-end.
Long-term debt, net of the current portion, amounted to $2.7 billion, down 0.2% from the figure as of Dec 31, 2023. The current portion of long-term debt totaled $25.6 million.
Total shareholders’ equity of $2.4 billion rose 4.7% from the 2023-end figure.
EHC generated net cash from operations of $238.8 million in the first quarter, which climbed 4.8% year over year. Adjusted free cash flow of $167.6 million increased 5.6% year over year.
Capital Deployment Update
Encompass Health did not buy back shares in the first quarter. The company had a leftover capacity of around $198 million under its buyback authorization as of Mar 31, 2024.
Management paid out a quarterly cash dividend of 15 cents per share.
2024 Outlook Revised
Net operating revenues are projected to be between $5.25 billion and $5.325 billion, the mid-point of which indicates an improvement of 10.2% from the 2023 reported figure of $4.8 billion.
Adjusted EBITDA is anticipated to be in the range of $1.030-$1.065 billion in 2024, the midpoint of which suggests 7.9% growth from the 2023 figure of $971.1 million.
Adjusted EPS from continuing operations is expected to stay within $3.86-$4.11, the mid-point of which implies a 9.5% rise from the 2023 figure of $3.64.
Adjusted free cash flow is estimated to lie between $475 million and $570 million for 2024. Maintenance capex is anticipated within $185-$195 million.
The company expects to open six de novo hospitals with a total addition of 280 beds. It also expects to add another 93 beds to existing hospitals, inclusive of a 40-bed freestanding hospital.
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 targets to bring about a CAGR of 6-8% in discharges in the same time frame.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Encompass Health has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 has been net zero. Notably, Encompass Health has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.