Encompass Health Shares Down 8% Despite Q3 Earnings & Revenue Beat

Core Insights - Encompass Health Corporation (EHC) shares have declined by 8.3% following the release of its third-quarter 2025 results, primarily due to increased operating expenses, although strong net patient revenue and capacity expansion measures provided some offset [1][8] Financial Performance - EHC reported adjusted earnings per share (EPS) of $1.23 for Q3 2025, exceeding the Zacks Consensus Estimate by 3.4% and reflecting a year-over-year increase of 19.4% [2][8] - Net operating revenues rose by 9.4% year over year to $1.5 billion, slightly surpassing consensus estimates by 0.1% [2][3] - Net patient revenue per discharge increased by 3.3% year over year to $21.7 billion, outperforming the growth estimate of 2.7% [3][8] - Total operating expenses reached $1.2 billion, an increase of 8.1% year over year, driven by higher salaries and benefits [3][8] - Net income for the quarter was $174.6 million, up 18.7% year over year, while adjusted EBITDA improved by 11.4% to $300.1 million, exceeding estimates [4][8] Operational Highlights - EHC added 39 beds to existing hospitals and opened three de novo hospitals during the quarter [4][8] - Total discharges increased by 5% year over year to 65,839, although this fell short of consensus estimates [3][8] Financial Position - As of September 30, 2025, EHC had cash and cash equivalents of $48.7 million, down from $85.4 million at the end of 2024 [5][6] - Total assets increased by 5.1% to $6.9 billion, while long-term debt rose by 1.5% to $2.4 billion [5][6] - Shareholders' equity advanced by 12.1% to $3.1 billion, and net cash from operations was $270.8 million, a 1.1% increase year over year [6] Capital Deployment - EHC repurchased shares worth $24.9 million during the quarter and has approximately $408 million remaining under its buyback authorization [7][8] - The company declared a quarterly cash dividend of 19 cents per share [7] Future Outlook - EHC raised its 2025 revenue forecast to between $5.905 billion and $5.955 billion, indicating a 10.4% increase from 2024 [9][10] - Adjusted EBITDA for 2025 is now estimated to be between $1.235 billion and $1.255 billion, reflecting a 12.8% growth from 2024 [9][10] - The adjusted EPS outlook for 2025 has been revised to a range of $5.22 to $5.37, suggesting a 19.5% increase from the previous year [10] - The company aims to open seven de novo hospitals and add 340 beds in 2025, with a long-term goal of inaugurating six to ten de novos annually from 2023 to 2027 [11][12]