Encompass Health (EHC) Q4 Earnings Beat on Higher Discharges
Encompass Health Corporation EHC reported fourth-quarter 2023 adjusted earnings per share (EPS) of 95 cents, which outpaced the Zacks Consensus Estimate by 14.5%. The bottom line rose 8% year over year.
Net operating revenues amounted to $1.2 billion, which advanced 9.6% year over year in the quarter under review. The top line beat the consensus mark by a whisker.
The quarterly results benefited on the back of an increase in discharges and higher net patient revenue per discharge. However, the upside was partly offset by elevated operating expenses.
Encompass Health Corporation Price, Consensus and EPS Surprise
Encompass Health Corporation price-consensus-eps-surprise-chart | Encompass Health Corporation Quote
Q4 Operations
EHC’s net patient revenue per discharge inched up 0.9% year over year in the fourth quarter, lower than our growth estimate of 1.4%. Total discharges of 59.2 million improved 8.3% year over year and surpassed the Zacks Consensus Estimate of 58.2 million and our estimate of 58.5 million.
Total operating expenses increased 10.4% year over year to $1.06 billion, lower than our estimate of $1.07 billion. The metric witnessed a year-over-year rise due to elevated salaries and benefits and, other operating expenses.
Net and comprehensive income of $119.1 million grew 1.4% year over year in the quarter under review.
Adjusted EBITDA advanced 9.6% year over year to $255 million, which beat our estimate of $234.5 million. Strong revenue growth provided an impetus to the performance of the metric.
Encompass Health added five beds to its existing hospitals in the quarter under review.
Financial Update (as of Dec 31, 2023)
Encompass Health exited the fourth quarter with cash and cash equivalents of $69.1 million, which increased more than three-fold from the 2022-end figure.
Total assets of $6.1 billion increased 8.3% from the level at 2022 end.
Long-term debt, net of the current portion, amounted to $2.7 billion, down 2% from the figure as of Dec 31, 2022. The current portion of long-term debt totaled $24.8 million.
Total shareholders’ equity of $2.3 billion rose 23.5% from the 2022-end figure.
EHC generated net cash from operations of $201 million in the fourth quarter, which climbed 16.7% year over year. Adjusted free cash flow of $93.5 million more than doubled year over year.
Capital Deployment Update
Encompass Health did not buy back shares in the fourth quarter. The company had a leftover capacity of around $198 million under its buyback authorization as of Dec 31, 2023.
Management paid out a quarterly cash dividend of 15 cents per share.
2024 Outlook Unveiled
Net operating revenues are projected between $5.2 billion and $5.3 billion, the mid-point of which indicates an improvement of 9.3% from the 2022 reported figure of $4.8 billion.
Adjusted EBITDA is anticipated to be $1.015-$1.055 billion in 2024, the midpoint of which suggests 6.6% growth from the 2022 figure of $971.1 million.
Adjusted EPS from continuing operations is expected to stay within $3.77-$4.06, the mid-point of which implies a 7.6% rise from the 2022 figure of $3.64.
Adjusted free cash flow is estimated to lie between $465 million and $565 million for 2024. Maintenance capex is anticipated within $185-$195 million.
Growth Targets Reaffirmed
Over the 2023-2027 period, management aims to inaugurate six to ten de novos each year as well as make bed additions in the range of 80-120 each year. It also targets to bring about a CAGR of 6-8% in discharges in the same time frame.
Zacks Rank
Encompass Health currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported fourth-quarter 2023 results so far, the bottom-line results of Inspire Medical Systems, Inc. INSP, Centene Corporation CNC and The Ensign Group, Inc. ENSG beat the Zacks Consensus Estimate.
Inspire Medical delivered an EPS of 49 cents in fourth-quarter 2023, up 390% year over year. The metric compares with the Zacks Consensus Estimate of a loss of 4 cents per share. Revenues of $192.5 million improved 39.6% year over year. The figure beat the consensus estimate by 0.1%. U.S. revenues of $189.4 million reflected an increase of 41% from the year-ago quarter on a reported basis.
During the reported quarter, INSP activated 78 new U.S. centers, thus bringing the total to 1,180 U.S. medical centers providing Inspire therapy. Revenues from outside the United States totaled $3.1 million, down 16% year over year on a reported basis. Gross profit increased 42.1% to $164.5 million. The gross margin expanded 149 basis points to 85.4%. Operating profit totaled $9.3 million against the prior-year quarter’s operating loss of $0.3 million.
Centene’s fourth-quarter 2023 adjusted EPS of 45 cents beat the Zacks Consensus Estimate by 4.7%. The bottom line declined 47.7% year over year. Revenues amounted to $39.5 billion, which improved 11% year over year. The top line outpaced the consensus mark by 9.6%. Revenues from Medicaid declined 1% year over year to $21.1 billion, while Medicare revenues fell 3% year over year to $5.3 billion. Meanwhile, commercial revenues jumped 68% year over year to $7.4 billion.
Premiums of CNC improved 7.4% year over year to $34.2 billion. The total membership was almost 27.5 million as of Dec 31, 2023, which increased 1.5% year over year but lagged our estimate of 27.8 million. It reported adjusted net earnings of $240 million in the quarter under review, which declined from $485 million a year ago.
Ensign Group reported a fourth-quarter 2023 adjusted EPS of $1.28, which beat the Zacks Consensus Estimate by a whisker. The bottom line advanced 16.4% year over year. Operating revenues of $980.4 million improved 21.1% year over year in the quarter under review. The top line outpaced the consensus mark by a whisker. ENSG’s adjusted net income grew 17.5% year over year to $73.7 million in the fourth quarter.
Same-store occupancy improved 240 bps year over year while transitioning occupancy expanded 150 bps year over year. The Skilled Services segment revenues rose 21% year over year to $940.8 million in the fourth quarter. Skilled nursing and campus operations of the segment totaled 259 and 27, respectively, at the fourth-quarter end.
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