Core Viewpoint - Encompass Health Corporation reported strong financial results for Q2 2025, with significant revenue growth and increased guidance for the full year, reflecting the company's operational efficiency and expansion efforts [1][3]. Financial Performance - Net operating revenue for Q2 2025 was $1,457.7 million, up from $1,301.2 million in Q2 2024, representing a growth of $156.5 million or 12.0% [2]. - Income from continuing operations attributable to Encompass Health per diluted share increased to $1.40, a rise of 23.9% from $1.13 in the same quarter last year [2]. - Adjusted earnings per share for Q2 2025 were $1.40, compared to $1.11 in Q2 2024, marking a 26.1% increase [2]. - Cash flows from operating activities rose by 24.3% to $270.2 million, primarily due to increased net income [2][9]. - Adjusted EBITDA for Q2 2025 was $318.6 million, up 17.2% from $271.8 million in Q2 2024 [2][9]. Operational Highlights - The company opened a new 60-bed hospital in Fort Myers, Florida, and added 26 beds to an existing facility, enhancing its capacity to serve patients [3]. - Total discharges increased by 7.2%, with same-store discharge growth of 4.7% [2][9]. - Net patient revenue per discharge grew by 4.2%, reaching $21,670 in Q2 2025 [2]. Updated Guidance - Encompass Health raised its full-year guidance for 2025, with updated expectations for net operating revenue between $5,880 million and $5,980 million, and adjusted EBITDA between $1,220 million and $1,250 million [3]. - Adjusted earnings per share guidance was also increased to a range of $5.12 to $5.34 [3]. Company Overview - Encompass Health is the largest owner and operator of inpatient rehabilitation hospitals in the U.S., with 169 hospitals across 38 states and Puerto Rico [6]. - The company is recognized for its high-quality rehabilitative care and has received accolades from Fortune and Forbes for its reputation [6].

Market Overview - The U.S. stock market remains strong despite concerns over credit downgrade and fiscal outlook, with major indexes finishing higher due to optimism from U.S.-China trade talks [1] - A temporary 90-day pause in tariffs and an agreement to lower mutual tariffs to 10% have positively influenced market sentiment [1] - The S&P 500 has closed higher in 16 of the past 19 trading days, indicating a strong performance [1] Inflation and Economic Indicators - Easing inflation indicators, with both CPI and PPI showing signs of cooling, have contributed to market buoyancy [2] - Despite Moody's downgrade raising long-term concerns about debt, the focus remains on near-term growth momentum and improving global trade relations [2] Investment Strategy - A relative price strength strategy is recommended, focusing on stocks that outperform the broader market [2][4] - Stocks that are underperforming on fundamental factors should be avoided, while those outperforming their sectors in price should be selected for better returns [5] Stock Recommendations - Recommended stocks based on relative price strength include Great Lakes Dredge & Dock Corporation (GLDD), Sprouts Farmers Market, Inc. (SFM), EverQuote, Inc. (EVER), and Encompass Health Corp. (EHC) [3] Screening Parameters - Stocks should be screened based on relative price change over 12 weeks, 4 weeks, and 1 week, as well as positive current-quarter estimate revisions [8] - Only Zacks Rank 1 (Strong Buy) stocks that have historically outperformed the S&P 500 are considered [9] Company Highlights - **Great Lakes Dredge & Dock Corporation (GLDD)**: Market cap of $760.8 million, with a 34.8% upward revision in 2025 earnings estimates and a 15.6% increase in shares over the past year [11][10] - **Sprouts Farmers Market, Inc. (SFM)**: Unique grocery model with a market cap of $1.5 billion, showing a 35.5% growth in 2025 earnings estimates and a 115.4% increase in shares over the past year [12][13] - **EverQuote, Inc. (EVER)**: Market cap of $867 million, with a 33% growth in 2025 earnings estimates, but shares have decreased by 3.5% in the past year [13][14] - **Encompass Health Corp. (EHC)**: Market cap not specified, with a 13.1% growth in 2025 earnings estimates and a 41.2% increase in shares over the past year [15]