Encompass Health (EHC) Stock Forecast & Price Target

Encompass Health Corp has demonstrated strong financial performance, with revenue exceeding expectations by 1%, driven by robust same-store volume growth of 5.8% and an increase in revenue per discharge of 4.2%. The company's EBITDA margin reached 20.6%, reflecting a 14% year-over-year growth supported by broad-based same-store volume increases, particularly in Medicare and Medicare Advantage segments. Additionally, the forecast for 2025 indicates an upward revision of estimated revenue to $5.853 billion, showcasing the company's positive growth trajectory.

Encompass Health Corp is facing a negative outlook due to an anticipated decline in cash flow of approximately $50 million year-over-year, primarily driven by increased growth-related capital expenditures and a slowdown in the ramp-up of new facilities. Additionally, the company's guidance indicates a contraction in EBITDA margin to 20.2%, influenced by ongoing labor pressures, elevated pre-opening costs, and incremental operational challenges, such as the implementation of Oracle Fusion. The organization also encounters various investment risks, including regulatory uncertainties related to Medicare and Medicaid, difficulties in staffing essential healthcare roles, and wage inflation outpacing price growth, which could hinder its financial performance.