Encompass Health Beats Q2 Earnings Estimates, Raises '26 View

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.

EHC’s Zacks Rank

EHC currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

How Did Peers Perform?

Here are some stocks from the broader Medical space that have also reported their quarterly results: Tenet Healthcare Corporation THC, Elevance Health, Inc. ELV and Pediatrix Medical Group, Inc. MD. Here's how they have performed:

Tenet Healthcare reported second-quarter 2026 adjusted earnings per share of $6.12, which surpassed the Zacks Consensus Estimate by 50%. The bottom line increased 52.2% year over year. THC’s net operating revenues advanced 6.8% year over year to $5.63 billion. The quarterly results were driven by strong same-facility revenue growth, higher patient acuity, disciplined expense management and higher Medicaid supplemental revenues. However, the gains were partly offset by an unfavorable payer mix due to lower exchange admissions.

Elevance Health reported second-quarter 2026 adjusted earnings per share of $7.45, which surpassed the Zacks Consensus Estimate by 20.6%. However, the bottom line declined 15.7% year over year. Operating revenues advanced 0.8% year over year to $49.8 billion. ELV’s quarterly results were primarily driven by higher premium yields in the Health Benefits segment and increased CarelonRx product revenues. The gains were partly offset by a decline in overall medical membership and higher operating expenses.

Pediatrix Medical reported second-quarter 2026 adjusted earnings per share of 63 cents, which beat the Zacks Consensus Estimate by 10.5%. The bottom line increased 18.9% year over year. Net revenues increased 4.1% year over year to $487.8 million. MD’s strong performance was driven by improved cash collection activity and a favorable payor mix, along with contributions from recent acquisitions. However, these gains were partly offset by lower patient volumes and higher operating costs.

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