Encompass raises 2026 revenue, EBITDA and EPS guidance on strong demand, better labor efficiency

 

Encompass Health beats Q1 2026 estimates and raises 2026 revenue, EBITDA and EPS guidance on strong demand, better labor efficiency

• Raised 2026 EPS guidance to $5.89–$6.11 and revenue outlook to $6.38–$6.47B.
• 2026 guidance raised for revenue, EBITDA, and EPS on Q1 strength, robust demand and improved demand visibility.
• Q1 2026 non-GAAP EPS of $1.60 increased 17% year over year.
• Q1 revenue rose 9% to $1.59B; adjusted EBITDA grew faster at 11.2%.
• Total discharges grew 4.3%, same-store 1.6%, with 3.7% net revenue per discharge growth.
• High occupancy, averaging 78.7% with 35% of hospitals above 90%, is constraining some growth.
• Labor environment improving: RN turnover at decade-plus low, premium labor spend down 9.4%.
• Strong quarter driven by robust inpatient rehab demand, firm pricing and better labor efficiency across facilities.
• Regulatory overhang persists from TEAM, RCD expansion, and CMS payment model RFI, adding uncertainty to the outlook.
• Medicare Advantage remains challenging, though admit-and-appeal pilot is showing early positive traction.
• Capex stepping up toward approximately 15% of revenue to relieve capacity constraints and support growth.
• Free cash flow strong at $194M; company repurchased $71.6M of stock and maintained dividend.
• CMS proposes 2.4% IRF rate update from October 2026, seen as a modest tailwind if finalized.
• Main concern: high occupancy and evolving Medicare Advantage and regulatory dynamics could constrain or pressure growth.

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