Core Insights - Encompass Health Corp (EHC) shares increased by 7.4% following the release of its second-quarter 2025 results, driven by strong net patient revenue and capacity expansion, despite elevated operating expenses [1][2][3] Financial Performance - Adjusted earnings per share (EPS) for Q2 2025 reached $1.40, exceeding the Zacks Consensus Estimate by 16.7% and reflecting a 26.1% year-over-year increase [2][8] - Net operating revenues rose 12% year-over-year to $1.5 billion, surpassing consensus estimates by 2.3% [2][8] - Net patient revenue per discharge grew 4.2% year-over-year to $21.7 billion, with total discharges increasing by 7.2% to 65,237 [3][4] Operating Expenses - Total operating expenses amounted to $1.2 billion, a 10.4% increase year-over-year, primarily due to higher salaries and benefits [3][4] Income and Cash Flow - Net income for Q2 2025 was $184.9 million, up 26.2% year-over-year [4][6] - Adjusted EBITDA improved 17.4% year-over-year to $318.6 million, exceeding estimates [4][6] - Net cash from operations reached $270.2 million, a 24.3% increase year-over-year, with adjusted free cash flow rising 30.5% to $185.9 million [6] Capital Deployment - EHC repurchased shares worth $24.7 million during the quarter and had approximately $433 million remaining under its buyback authorization [7] - The company declared a quarterly cash dividend of 17 cents per share, which was increased to 19 cents in July [7] 2025 Outlook - The company raised its 2025 net operating revenue forecast to between $5.88 billion and $5.98 billion, indicating a 10.4% increase from 2024 [9][10] - Adjusted EPS for 2025 is now expected to be between $5.12 and $5.34, reflecting an 18.1% growth from 2024 [10] - Adjusted free cash flow is projected to be between $705 million and $795 million, up from previous guidance [10] Growth Strategy - EHC plans to open seven de novo hospitals and add 340 beds, with expectations to add 100-120 beds to existing hospitals in 2025 [11] - The company aims for a compound annual growth rate (CAGR) of 6-8% in discharges from 2023 to 2027 [12]

Investment Rating - The report assigns a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [5][12]. Core Insights - The company reported a revenue of 2.678 billion RMB in 2024, a decrease of 1.46% year-on-year, and a net profit attributable to shareholders of -102 million RMB [2]. - In Q1 2025, the company achieved a revenue of 742 million RMB, reflecting a year-on-year increase of 9.82%, with a net profit of 27 million RMB, up 61.18% year-on-year [2]. - The company is focusing on the iterative development of refractive surgery techniques and has seen stable growth in essential projects [3]. Summary by Sections Performance Review - In 2024, the company generated revenue of 2.678 billion RMB, down 1.46% year-on-year, and reported a net loss of 102 million RMB [2]. - For Q1 2025, the company recorded revenue of 742 million RMB, a 9.82% increase year-on-year, with a net profit of 27 million RMB, marking a 61.18% increase year-on-year [2]. Operational Analysis - The refractive surgery segment generated 1.227 billion RMB in revenue in 2024, down 5.31% year-on-year, with a gross margin of 47.02% [3]. - The cataract project revenue was 576 million RMB, down 3.04% year-on-year, influenced by national procurement policies [3]. - The company is introducing new technologies to enhance its competitive edge and is focusing on high-end products to mitigate the impact of price reductions [3]. Expansion Strategy - The company is implementing a "national chain + local integration" strategy, focusing on urban centers and gradually maturing new hospitals to drive future growth [4]. Profitability Forecast - The company is expected to achieve net profits of 130 million RMB, 161 million RMB, and 202 million RMB for 2025, 2026, and 2027, respectively, with corresponding EPS of 0.87, 1.07, and 1.35 RMB [5].