Tuesday, Barclays updated its outlook on Encompass Health Corp (NYSE:EHC), raising the shares target to $116 from $109 while maintaining an Overweight rating on the stock. The firm highlighted Encompass Health's third-quarter adjusted EBITDA, which surpassed expectations, crediting factors such as robust discharge growth, favorable pricing, and controlled wage inflation for the company's performance.
Encompass Health reported an adjusted EBITDA of $269 million on Monday, after the market closed, beating the Street's forecast of $255 million. This 5% beat was attributed to a 7% increase in same-store discharge growth, a 2.5% rise in pricing, and wage inflation remaining below 4% year-over-year. Moreover, the company benefited from $3.4 million in EBITDA from provider tax revenues and improved its bad debt position by 30 basis points, thanks to better collections and fewer claims reviews, estimated to be worth around $4 million.
Barclays' analysis suggests that Encompass Health's earnings report is one of the most straightforward of the quarter, underlining the company's strong fundamentals. The analyst pointed out that Encompass Health's stock is largely shielded from potential risks associated with the upcoming election, implying a stable outlook for the healthcare provider.
The performance metrics provided by Encompass Health indicate a solid operational standing, with the company managing to navigate economic pressures effectively. The provider tax revenue and the reduction in bad debt have also contributed to the company's financial health.
In other recent news, Encompass Health Corporation has reported impressive Q3 results, surpassing analyst expectations. The company's adjusted earnings per share for Q3 came in at $1.03, beating the consensus estimate of $0.94. Revenue was also higher than anticipated at $1.35 billion, an increase of 11.9% year-over-year, compared to the projected $1.33 billion.
A significant factor contributing to this revenue increase was a strong discharge growth of 8.8%, including same-store growth of 6.8%. Furthermore, net revenue per discharge grew 2.5% compared to the same period last year. These recent developments highlight the company's robust performance.
Encompass Health has also raised its full-year outlook for 2024. The company now projects an adjusted EPS of $4.19 to $4.33, a rise from its previous forecast of $3.97 to $4.22, and above the $4.19 consensus. The revenue forecast has also been revised to a range of $5.325 billion to $5.375 billion, up from the previously anticipated $5.275 billion to $5.350 billion. This improved outlook indicates a continuation of momentum in patient volumes and pricing power for the company's inpatient rehabilitation services.
InvestingPro Insights
Encompass Health's strong performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's market cap stands at $9.37 billion, reflecting its substantial presence in the healthcare sector. EHC's revenue growth of 10.86% over the last twelve months aligns with the article's mention of robust discharge growth and favorable pricing.
InvestingPro Tips reinforce the positive outlook presented by Barclays. One tip notes that EHC is "Trading near 52-week high," which corroborates the stock's strong performance and the raised price target. Additionally, the tip indicating "High return over the last year" is consistent with the company's impressive 54.16% price total return over the past year.
These insights complement the article's narrative of Encompass Health's solid fundamentals and market position. For investors seeking a deeper understanding of EHC's financial health and potential, InvestingPro offers 7 additional tips, providing a comprehensive analysis to inform investment decisions.
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