Encompass Health Raises Outlook as Patient Volumes Accelerate
Second-quarter revenue reached $1.597 billion as patient discharges gained pace.
Encompass Health Corp. (EHC), an operator of inpatient rehabilitation hospitals, raised its full-year outlook after second-quarter revenue grew 9.6% year over year, accelerating from 9.0% in the first quarter.
The quarter marked a shift toward volume-led growth. Discharges rose 5.6% to 68,895, up from first-quarter growth of 4.3%, while same-store discharge growth accelerated to 2.8% from 1.6%. The same-store rate remained below the 3.2% recorded in the fourth quarter of 2024.
Revenue increased $10.8 million, or 0.7%, sequentially. Adjusted earnings rose 10.7% from a year earlier to $1.55 a share, easing from 16.8% growth in the first quarter and declining from $1.60 a share sequentially.
Net patient revenue per discharge increased 3.9% year over year to $22,521, compared with 3.7% growth in the first quarter. The measure slipped 0.5% sequentially, leaving higher patient volumes to drive the quarter-over-quarter revenue gain.
Adjusted EBITDA increased 9.2% to $348.0 million, slowing from 11.2% growth in the prior quarter. The adjusted EBITDA margin narrowed to about 21.8% from roughly 22.0% sequentially and 21.9% a year earlier. Adjusted free cash flow fell 4.8% to $177.0 million as maintenance capital expenditures increased 46.8% to $66.2 million, even as operating cash flow rose 4.6%.
Encompass Health now expects 2024 revenue of $6.410 billion to $6.490 billion, raising both ends of its previous range. Its adjusted EBITDA forecast increased by $15 million at each end to between $1.365 billion and $1.395 billion, while adjusted EPS guidance rose to $6.02 to $6.25 from $5.89 to $6.11. The company had previously lifted its initial EPS outlook during the first quarter.
The hospital network expanded to 176 facilities from 174 at the first-quarter release as Encompass Health opened three hospitals and added 54 beds at existing locations during the first half. The company expects five additional hospital openings and more than 100 added beds during the rest of 2024.
The board increased the stock-repurchase authorization to $1 billion after Encompass Health bought back $145.8 million of shares in the first half. The expanded authorization paired a larger capital-return capacity with the company's continued hospital buildout.