It's been a good week for Encompass Health Corporation (NYSE:EHC) shareholders, because the company has just released its latest full-year results, and the shares gained 3.3% to US$79.59. Revenues of US$4.6b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$3.61, missing estimates by 5.8%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following the latest results, Encompass Health's 15 analysts are now forecasting revenues of US$4.90b in 2020. This would be a reasonable 6.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to dip 3.1% to US$3.55 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$4.90b and earnings per share (EPS) of US$3.56 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
Analysts reconfirmed their price target of US$84.81, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Encompass Health, with the most bullish analyst valuing it at US$100.00 and the most bearish at US$68.00 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect Encompass Health's revenue growth will slow down substantially, with revenues next year expected to grow 6.3%, compared to a historical growth rate of 11% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.8% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Encompass Health to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target held steady at US$84.81, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Encompass Health analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Encompass Health's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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