Why You Should Invest in Encompass Health (EHC) Stock for Now
Encompass Health Corporation EHC is expected to gain from improving patient volumes, solid demand for rehabilitation services, expanding facility count and a robust cash position. A solid 2023 business outlook also reinforces investors’ confidence in the stock.
Outperformer & Zacks Rank
Over the past year, shares of Encompass Health have gained 14.7%, outperforming the industry’s 10.9% rise. Headquartered in Birmingham, AL, EHC operates as a provider of post-acute healthcare services. With a market cap of $6.8 billion, it has a strong foothold in the domestic market.
Courtesy of solid prospects, this Zacks Rank #2 (Buy) stock is worth adding to your portfolio at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for EHC’s current-year earnings is pegged at $3.52 per share, which has witnessed six upward estimate revisions in the past 60 days against none in the opposite direction. The estimate indicates 23.5% year-over-year growth. Encompass Health beat on earnings in each of the last four quarters, the average being 17.3%.
Encompass Health Corporation Price and EPS Surprise
Encompass Health Corporation price-eps-surprise | Encompass Health Corporation Quote
The consensus mark for current-year revenues is pegged at $4.8 billion. EHC anticipates revenues to be in the range of $4.77-$4.80 billion this year, the midpoint of which indicates 10% growth from the 2022 reported figure. Adjusted earnings per share are estimated to be between $3.41 and $3.52, the midpoint of which suggests 21.6% growth from the 2022 figure. Growing patient volumes will drive revenues for Encompass Health. The top line improved 10.7% year over year in the first nine months of 2023.
Encompass Health’s expansion strategy remains quite commendable. It constructs inpatient rehabilitation hospitals across different U.S. communities to delve deep into regions grappling with inadequate access to rehabilitation services. EHC also adds beds to expand the operations of its existing facilities. Management expects to add 150-plus beds to its existing facilities in 2024.
Each hospital inauguration advances the capabilities and expands the nationwide foothold of Encompass Health. It also enters into joint ventures with regional healthcare organizations for constructing hospitals, which in turn, empower the company to gain an in-depth knowledge of the healthcare needs in its immediate surroundings. Riding on an active expansion route, the healthcare portfolio of EHC currently comprises 161 hospitals spread across 37 states and Puerto Rico. The latest addition to its hospital count was the Wisconsin-based Rehabilitation Hospital of Fitchburg, which contains 56 beds.
To pursue such uninterrupted growth-related investments, a solid financial position is in dire need, which puts EHC at an advantage. Encompass Health boasts growing cash reserves and solid cash-generating abilities. As of Sep 30, 2023, cash and cash equivalents increased nearly five-fold from the 2022-end level. It also generated operating cash flows of $649.8 million in the first nine months of 2023.
However, Encompass Health’s long-term debt-to-capitalization of 56% is much higher than the industry average of 46.6%. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Other Stocks to Consider
Some other top-ranked stocks in the Medical space are Novo Nordisk A/S NVO, Centene Corporation CNC and Penumbra, Inc. PEN. Each of these companies currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Novo Nordisk’s earnings surpassed estimates in two of the last four quarters, matched the mark once and missed the same on the remaining one occasion, the average surprise being 0.6%. The Zacks Consensus Estimate for NVO’s 2023 earnings indicates a surge of 51.5%, while the same for revenues suggests an improvement of 31.5% from the respective year-ago actuals. The consensus mark for NVO’s 2023 earnings has moved 2% north in the past 60 days.
The bottom line of Centene beat estimates in two of the trailing four quarters, missing twice, the average beat being 5.6%. The Zacks Consensus Estimate for CNC’s 2023 earnings indicates a rise of 15.1%, while the same for revenues suggests an improvement of 4.4% from the respective prior-year tallies. The consensus mark for CNC’s 2023 earnings has moved 0.6% north in the past 60 days.
Penumbra’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 55.7%. The Zacks Consensus Estimate for PEN’s 2023 earnings is pegged at $2.04 per share, which indicates an increase of nearly 13-fold from the year-ago reported figure. The consensus mark for revenues suggests an improvement of 25.3% from the year-ago actual. The consensus mark for PEN’s 2023 earnings has moved 17.9% north in the past 60 days.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
Centene Corporation (CNC) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
Encompass Health Corporation (EHC) : Free Stock Analysis Report
