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Encompass Health Easily Beats Wall Street Earnings Estimates in Q1

Keith Speights, The Motley Fool

The last time Encompass Health (NYSE: EHC) announced its quarterly results, there were several things for investors to like. At the top of the list was a year-over-year earnings increase of 14.3%. Revenue also grew 8.6% year over year.

On Friday, investors learned how Encompass Health performed in the first quarter, with the company providing a quarterly update before the market opened. How did Encompass Health fare? Here's what you need to know about the integrated healthcare company's Q1 results.

Home health nurse showing her stethoscope to a pediatric patient

Image source: Getty Images.

By the numbers

Encompass Health's top-line performance improved in the first quarter. Revenue rose 7.5% year over year to $1.12 billion. This met the analysts' consensus revenue estimate.

The company's bottom line in the first quarter also looked good. Encompass Health reported net income of $102.3 million, or $1.03 per share, on a GAAP basis, compared to $83.8 million, or $0.84 per share, in the same period in 2018.

On a non-GAAP adjusted basis, Encompass Health's net income in the first quarter was $1.04 per share. This reflected a 12% increase from the prior-year period's adjusted net income of $0.93 per share. It was also well above Wall Street analysts' Q1 adjusted earnings estimate of $0.89 per share.

Behind the numbers

Encompass Health's solid revenue growth stemmed from volume and pricing growth for both of the company's operating segments -- inpatient rehabilitation, and home health and hospice. Inpatient rehabilitation revenue for the company rose 3.7% year over year to nearly $848 million. Home health and hospice revenue jumped 23% over the prior-year period to $254 million. 

The company's earnings rose primarily because of this increase in revenue. Operating expenses did increase, but only by less than 7% -- below Encompass Health's rate of revenue growth. 

Earnings per share (EPS) also received a small boost from stock buybacks. Encompass Health repurchased nearly 220,000 shares for around $13 million in the first quarter. At the end of the quarter, the company had roughly $237 million remaining under its existing stock repurchase authorization.

Looking ahead

Encompass Health expects that revenue for full-year 2019 will be between $4.5 billion and $4.6 billion. The company anticipates adjusted EBITDA to be between $925 million and $945 million, with adjusted non-GAAP EPS between $3.71 and $3.85.

One key development for investors to look for in the next quarter is the anticipated close of Encompass Health's acquisition of Alacare Home Health and Hospice. Encompass Health is buying the privately held company for $217.5 million. The deal is expected to close in June.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.