It has been about a month since the last earnings report for Encompass Health (EHC Quick QuoteEHC - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Encompass Health due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent catalysts for Encompass Health Corporation before we dive into how investors and analysts have reacted as of late.

Encompass Health Beats Q2 Earnings Estimates, Raises '26 View

Encompass Health reported second-quarter adjusted earnings per share (EPS) of $1.55, which beat the Zacks Consensus Estimate by 4.7%. The bottom line increased 10.7% year over year.

Net operating revenues of $1.6 billion improved 9.6% year over year. The top line marginally beat the consensus mark by 1.5%.

The robust results were primarily driven by strong growth in net patient revenue per discharge, supported by solid discharge volumes and contributions from capacity expansion. However, the upside was partly offset by elevated operating expenses, particularly higher salaries, benefits, and general and administrative costs.

EHC’s Q2 Operations

EHC’s net patient revenue per discharge rose 3.9% year over year and beat the Zacks Consensus Estimate by 2.1%. Total discharges grew 5.6% year over year to 68,895, but missed the consensus estimate by 0.2%.

Total operating expenses of $1.3 billion escalated 9.2% year over year due to elevated salaries, benefits, other operating and general & administrative expenses. The figure marginally missed our estimate by 0.9%.

Net income climbed 12.2% year over year to $207.4 million in the second quarter.

Adjusted EBITDA of $348 million grew 9.2% year over year and surpassed our estimate of $330.2 million.

In the first half, Encompass Health opened three new hospitals with beds totaling 139 and added 54 beds across its existing hospitals.

Financial Update (As of June 30, 2026)

Encompass Health exited the second quarter with cash and cash equivalents of $107.7 million, which rose 49.2% from the 2025-end level.

Total assets of $7.5 billion increased 5.2% from the 2025-end level.

Long-term debt, net of the current portion, amounted to $2.6 billion, which increased 6.2% from that recorded as of Dec. 31, 2025. The current portion of long-term debt totaled $35.9 million.

Total shareholders’ equity of $3.4 billion improved 5.8% from the 2025-end figure.

EHC generated $595.7 million of net cash from operations in the first half, which improved 6.6% from the prior-year figure. Adjusted free cash flow decreased 9.2% to $370.8 million for the period.

Capital Deployment Update

Encompass Health bought back 0.7 million shares worth $74.2 million in the second quarter of 2026. As of June 30, 2026, the company had a leftover capacity of around $188 million under its buyback authorization.

On July 23, 2026, Encompass Health increased the aggregate common stock repurchase authorization to $1 billion.

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

2026 Outlook by Encompass Health

Net operating revenues are now expected to be between $6.41 billion and $6.49 billion, up from the earlier projection of $6.375-$6.475 billion. This reflected growth over the 2025 reported figure of $5.94 billion.

Adjusted EBITDA is now expected to range between $1.365 billion and $1.395 billion, up from $1.27 billion in 2025. The prior guidance was $1.35-$1.38 billion for the metric.

Adjusted EPS from continuing operations is projected to be between $6.02 and $6.25, reflecting an increase from $5.45 in 2025. The earlier guidance for the metric was $5.89-$6.11.

Adjusted free cash flow is presently forecasted to be in the range of $760-$865 million. Maintenance CAPEX is expected to remain in the range of $225-$240 million.

The company still expects to open eight de novo hospitals, adding a total of 389 beds. It plans to add 150 to 200 beds to its existing hospitals.

Growth Targets Reaffirmed

Over the 2023-2027 period, management still aims to inaugurate six to 10 de novos each year, as well as make bed additions in the range of 80-120 every year. It also expects a CAGR of 6-8% in discharges in the same time frame.

It also expects to open freestanding hospitals, including remote and satellite locations, with more than 30 beds beginning in 2026.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in estimates review.

VGM Scores

Currently, Encompass Health has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Encompass Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Encompass Health belongs to the Zacks Medical - Outpatient and Home Healthcare industry. Another stock from the same industry, DaVita HealthCare (DVA Quick QuoteDVA - Free Report) , has gained 0.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

DaVita HealthCare reported revenues of $3.55 billion in the last reported quarter, representing a year-over-year change of +5.2%. EPS of $4.02 for the same period compares with $2.95 a year ago.

For the current quarter, DaVita HealthCare is expected to post earnings of $3.78 per share, indicating a change of +50.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -12.7% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for DaVita HealthCare. Also, the stock has a VGM Score of A.