Encompass Health Stock Earnings Reports

Encompass Health reported a strong start to 2026: Q1 revenue rose 9% to $1.59 billion and adjusted EBITDA increased 11.2% to $348.8 million. Discharge growth was +4.3% (1.6% same-store) and net revenue per discharge rose 3.7%. Clinical outcomes improved vs. Q1 2025 (higher discharge-to-community, lower acute transfers and SNF discharges) and RN/therapist turnover declined to multi-year lows, helping reduce premium labor spend. The company is actively expanding capacity: opened a 49-bed hospital in Irmo, SC, added 44 beds, plans to open seven more hospitals in 2026 (totaling ~340 beds), expects 100–150 incremental bed adds to existing hospitals this year, and maintains a pipeline of 11 hospitals (520 beds) beyond 2026. Management introduced a “small-format” hospital concept (remote locations under an existing Medicare provider number) to support a hub-and-spoke strategy and expects at least one small-format opening in 2027. They continue to monitor regulatory changes (TEAM, RCD expansion, and the 2027 IRF proposed rule) and will comment on CMS proposals. Cash flow remained strong: Q1 adjusted free cash flow was $194 million; the company repurchased $71.6 million of stock in Q1, paid and declared dividends, and exited the quarter with net leverage of 1.9x. Management raised 2026 guidance: net operating revenue $6.375B–$6.470B, adjusted EBITDA $1.35B–$1.38B, and adjusted EPS $5.89–$6.11. Key near-term risks noted include regulatory changes, MA/appeals trends, local occupancy constraints (about 35% of hospitals >90% occupancy) and timing of bed additions; management highlighted strategies to address these (bed adds, small-format hospitals, a revised internal occupancy trigger for expansions, and an admit-and-appeal MA pilot).