'Growth trajectory remains robust for Encompass Health'

 Encompass Health Corporation reported a rise in Q1 revenue numbers driven by higher volumes and favorable pricing trends. With the majority of its patient base consisting of an aging population that is expected to grow, the company remains highly optimistic about its future growth prospects. Expansion plans, including the recently announced new hospitals in Florida and Las Vegas, and upwardly revised guidance further reinforce this positive outlook, with analysts expressing bullish sentiments.

Encompass Health Corporation, established in 1984 under the name HealthSouth and headquartered in Alabama, is a prominent provider of inpatient rehabilitation services in the United States. It delivers rehabilitative care to patients recovering from significant injuries or illnesses, using advanced technology and innovative treatments to maximize recovery. It has a comprehensive national network of inpatient rehabilitation hospitals, spanning 38 states in the US, and Puerto Rico, with notable concentrations in Florida and Texas. The company has about 40,900 employees (including 28,085 FTEs) and operates 167 inpatient rehabilitation hospitals as of March 2025.

Healthy revenue growth in Q1 25

Encompass Health Corporation reported a 10.6% y/y increase in net operating revenues for Q1 2025, reaching $1,455.4m, driven by higher patient volumes and favorable pricing. Total discharges rose by 6.3% to 64,985, including a 4.4% increase in same-store discharges. Growth in discharges from new stores was supported by new facilities in various locations, including joint ventures and wholly owned hospitals. Net patient revenue per discharge grew by 3.9% y/y to $21,816 due to increased reimbursement rates.

Adjusted EBITDA moved up by 14.9% y/y to $313.6m, with margins improving by 80 bp to 21.5%, attributed to lower expenses as a percentage of sales from higher volumes. Net income surged by 34.7% y/y to $151.5m, driven by higher revenue, which also trickled down to a 20.9% growth in CFO, totaling $288.6m.

In 2025, the company achieved several milestones in development and expansion. It began operating a new 40-bed inpatient rehabilitation hospital in Athens, Georgia, in partnership with Piedmont, added 25 new beds to existing hospitals, and announced further hospital developments.

Aging population driving demand

The company remains optimistic about its intermediate and long-term business prospects. It operates in a large, underpenetrated, and expanding inpatient rehabilitation market, characterized by a low conversion rate of presumptively eligible patients. The fragmented nature of the sector offers numerous opportunities for unit acquisition and joint ventures. The company also benefits from significant barriers to entry and economies of scale.

It has a resilient business model centered around non-discretionary conditions predominantly affecting an aging population. Furthermore, it expects the demand for rehabilitation services to rise owing to favorable demographics. The majority of its patients are aged 65+, with Medicare enrollees projected to grow by 3% p.a., reaching 73m by 2030. The average age of its Medicare patients is 78, and the population aged 75 to 79 is expected to grow by 5% annually through 2026.

Upward revision in guidance

Encompass Health Corporation has updated its FY 25 guidance, showing growth in net operating revenue from $5,800-$5,900m to $5,850-$5,925m and adjusted EBITDA from $1,160-$1,200m to $1,185-$1,220m. Adjusted EPS forecast from continuing operations has improved from $4.67-$4.96 to $4.85-$5.10. Medicare pricing will increase by 3.3% for Q2 and Q3 and an estimated 2.7% for Q4, with managed care pricing rising by 2.0%-3.0%. Capacity expansions include seven new hospitals with 340 beds, a 50-bed satellite hospital, and 100-120 additional beds to existing hospitals, with pre-opening and ramp-up costs estimated at $18-$22m.

Encompass Health's 2023-2027 growth targets include 6 to 10 de novo hospitals per year, 80 to 120 bed additions per year, and a 6% to 8% discharge CAGR. It has also announced its preliminary plans include building a 50-bed inpatient rehabilitation hospital in Apollo Beach, Florida, expected to open in 2027, and another in North Las Vegas, Nevada, expected to open by 2028.

Recovery in margins

Encompass Health Corporation achieved a revenue CAGR of 10.2% from FY 21 to FY 24, reaching $5.4bn in FY 24. Operating income grew by 9.4% to $864.5m, with operating margins recovering to 16.1% in FY 24. Cash flows from operations grew at a CAGR of 11.9%, reaching $1.0bn in FY 24.

Analysts project a revenue CAGR of 8.6% from FY 24 to FY 27, reaching $6.9bn. Operating income is expected to grow at a CAGR of 5.6%, reaching $1.0bn with a 14.8% operating margin in FY 27. Net profit is projected to rise by a CAGR of 11.7%, reaching $635.6m with a 9.2% net profit margin in FY 27.

The Ensign Group, a local peer, achieved a 3-year revenue CAGR of 17.5%, reaching $4.3bn in FY 24. Its operating profit grew at a CAGR of 11.2% to $358.3m, with an operating margin of 8.4% in FY 24.

Stock rallied sharply

Encompass Health Corporation's stock rose sharply by 40.2% over the past year, outperforming its local peer, The Ensign Group, which increased by 26.2%. Encompass Health is currently trading at a P/E of 23.7x, lower than The Ensign Group's 26.1x but higher than its 3-year historical average of 20.7x. Its EV/EBITDA is 11.9x, below The Ensign Group's 15x but above its historical average of 10.3x.

The stock is liked by all 13 analysts covering the stock with 11 having ‘Buy ratings’ and 2 having ‘Outperform’ ratings. They have set an average target price of $131.6, implying 10.4% upside potential from the current price. Overall, Encompass Health has demonstrated positive revenue growth and improved cash flows. It benefits from a growing inpatient rehabilitation market, favorable demographic trends, significant barriers to entry, economies of scale, and a resilient business model. The stock has achieved significant returns, with bullish sentiment reflected in analyst ratings growth forecasts. However, risks include operating in a highly regulated industry, staffing shortages and increased labor costs, and potential reductions or delays in reimbursement from government and private payors, which could adversely affect financial results.

https://www.marketscreener.com/quote/stock/ENCOMPASS-HEALTH-CORPORAT-39742680/news/Growth-trajectory-remains-robust-for-Encompass-Health-50316186/

US-Canada trade talks stopped until certain taxes dropped, Trump tells Fox News

 U.S. trade talks with Canada will be stopped "until such time as they drop certain taxes," President Donald Trump said in an interview broadcast on Sunday.

Trump made the remarks in an interview on Fox News' "Sunday Morning Futures with Maria Bartiromo" program.

https://www.aol.com/news/us-canada-trade-talks-stopped-150934714.html

'Trump tells Fox News he has group of wealthy people to buy TikTok'

 U.S. President Donald Trump said in a Fox News interview broadcast on Sunday that he had found a buyer for the TikTok short-video app, which he described as a group of "very wealthy people" whose identities he will reveal in about two weeks.

Trump made the remarks in an interview on Fox News’ "Sunday Morning Futures with Maria Bartiromo" program. He said the deal he is developing would probably need China’s approval to move forward and he predicted Chinese President Xi Jinping would likely approve it.

The U.S. president earlier this month had extended to September 17 a deadline for China-based ByteDance to divest the U.S. assets of TikTok despite a law that mandated a sale or shutdown without significant progress.

A deal had been in the works this spring that would have spun off TikTok’s U.S. operations into a new U.S.-based firm, majority-owned and operated by U.S. investors, but it was put on hold after China indicated it would not approve it following Trump’s announcements of steep tariffs on Chinese goods.

"We have a buyer for TikTok, by the way," Trump said. "I think I’ll need probably China’s approval. I think President Xi will probably do it."

A 2024 U.S. law required TikTok to stop operating by January 19 unless ByteDance had completed divesting the app’s U.S. assets or demonstrated significant progress toward a sale.

Trump, who credits the app with boosting his support among young voters in last November’s presidential election, has extended the deadline three times.

https://www.investing.com/news/stock-market-news/trump-says-in-fox-interview-he-has-a-group-of-wealthy-people-to-buy-tiktok-4116057

Texas Law Gives Grid Operator Power To Disconnect Data Centers During Crisis

 By Brian Martucci of UtilityDrive

Utilities, energy system analysts and ERCOT expect exponential growth of data centers and other large loads in Texas over the next several years. ERCOT forecasts 138 GW of large loads on its grid by 2030, up from 87 GW this year.

Even if only a fraction of proposed data centers get built, the boom could threaten grid reliability during the spring and fall months, when many thermal generators go down for planned maintenance, Aurora Energy Research said earlier this month. Reliability is already a concern in some parts of ERCOT — including the San Antonio area, where ERCOT is deploying more than 400 MW of mobile generation units and inked a costly “reliability must run” agreement with an aging 400-MW gas plant. 

Aurora models suggest data centers will be the largest single source of load flexibility available to mitigate Texas’ reliability risk. By 2030, up to 50% of the expected 35 GW of ERCOT’s data center capacity could provide some degree of emergency reliability support, Aurora said.

S.B. 6 authorizes the Public Utility Commission of Texas to develop two demand management programs — one mandatory and one voluntary — to ensure Texas data centers and other non-critical large loads help rather than hinder reliability.

The law’s intent is “to make sure [large loads] pose as little reliability risk to the system as possible and [are] not drinking the milkshake of all other Texas power customers,” NRG Vice President of Regulatory Affairs Travis Kavulla said in an interview.

S.B. 6 could avoid a future scenario like Winter Storm Uri, the dayslong freeze in February 2021 that saw millions of residential customers cut off from the grid as nearby industrial loads hummed along, Kavulla added.

The mandatory demand management program applies to loads of 75 MW or greater that interconnect to ERCOT from January onwards. It allows utilities to disconnect eligible loads during firm load shed events and mandates the installation of shutoff equipment as a condition of grid interconnection.

The voluntary program is a competitively procured reliability service active during specific times of the year, subject to a minimum 24-hour notice period and off-limits to any large-load customer that “curtails in response to the wholesale price of electricity … or that otherwise participates in a different reliability or ancillary service,” the law says.

The advance warning period is key for this sort of voluntary program, especially one counting on participation from hyperscale data centers with sensitive IT equipment worth billions, Kavulla said.

“This should not be the kind of demand response where you’re calling it with no notice and curtailing the customer straight off,” he said.

The mandatory program will surely alleviate stress on the ERCOT grid during extreme weather events but the jury is still out on customer uptake for the voluntary program, Kavulla said. Some data center operators have sounded open to voluntarily curtailing their loads or switching to onsite backup generation when needed, while others have been more resistant, he noted.

Kavulla credited Texas legislators for “calling the question,” however. 

“They have decided to create a market and test [customers’] willingness to participate,” he said. “Nothing gets people thinking like offering them money.”

Kavulla and Texas Blockchain Council President Lee Bratcher cheered other S.B. 6 provisions, like a $100,000 minimum initial interconnection fee for large load customers and a requirement that such customers disclose to utilities any potentially duplicative interconnection requests elsewhere in Texas. 

Both provisions could mitigate the “phantom loads” gumming up utility and grid operator forecasts in Texas and elsewhere, Bratcher said in an email.

“The Texas Blockchain Council and our member companies are glad to see that Senate Bill 6 tackles the phantom load challenge associated with the interconnection queue [and gives ERCOT] a more accurate picture of future load growth,” Bratcher said.

Some experts say 80% to 90% of proposed data centers in the U.S. interconnection queue will never get built, in part because they duplicate requests made in other utility territories.

The next step for ERCOT and its continental counterpart, the North American Electric Reliability Corporation, is to “develop a non-firm load category for modeling purposes [that] would greatly increase the efficient utilization of transmission infrastructure and properly signal load behavior expectations to the transmission/distribution service providers,” Bratcher said.

And while Texas’s intrastate electricity market makes it something of a special case, some core S.B. 6 provisions are transferable to other states in the restructured Eastern markets, Kavulla said.

For example, states in the PJM Interconnection “could certainly precondition or accelerate interconnection of large loads on the basis of their willingness to participate in demand response,” he said.

https://www.zerohedge.com/energy/texas-law-gives-grid-operator-power-disconnect-data-centers-during-crisis

'Options Markets Show Traders Reposition as Mideast Tension Fades'

 

Stocks hit record highs last week and energy futures retreated after Middle East tensions eased. But in some parts of the options markets, there are still signs of stress as investors position for potential geopolitical and macroeconomic upsets.

In the short term, equity investors are getting more bullish, with the premium for puts shrinking. But longer term, skew has barely changed, signaling less enduring optimism. Likewise, longer-dated futures on the Cboe Volatility Index have remained higher, showing more deferred angst around the economic impact of tariffs.

https://www.bloomberg.com/news/articles/2025-06-29/options-markets-show-traders-reposition-as-mideast-tension-fades

Iraq holds talks with Excelerate Energy on buying first LNG from US

 Excelerate Energy (NYSE:EE) +2.1% in Thursday's trading after Bloomberg reported that Iraq's government is in advanced talks to facilitate the country's first-ever liquefied natural gas imports, seeking to cut dependence on Iran for supplies.

Excelerate (NYSE:EE) is one of several companies to have submitted a bid to provide an LNG import ship and secure supplies of the fuel, said Ali Salman, acting director general for the state-run South Gas Company, which has been charged with overseeing the development of the project.

Iraq's push to buy LNG comes as the country halted electricity imports from neighboring Iran earlier this year after the Trump administration ended a sanction waiver in an effort to tighten pressure on Iran.

Iraq does not produce enough gas to operate its mostly gas-fired power plants and suffers from crippling blackouts every summer when demand peaks.

The U.S. has urged Iraq to diversify the origins of its gas imports, and the government signed an agreement with Turkmenistan last year for gas supplies, and has been in talks with Qatar and others to find more solutions.

https://www.msn.com/en-us/money/markets/iraq-in-talks-with-excelerate-energy-to-facilitate-its-first-ever-lng-imports-bloomberg/ar-AA1Hua0M

Blue State In Free Fall

 by John Hinderaker

Everyone knows that California, New York and Illinois are circling the drain after years of failed liberal government. Fewer are aware that Minnesota, once hailed by Barack Obama as the exemplar of a successful blue state, is also on the rocks.

Historically, Minnesota was a prosperous place. The most basic measure of economic well-being is per capita GDP. By this measure, Minnesota always enjoyed a “premium” over the U.S. as a whole. As recently as 2014, Minnesota’s per capita GDP was more than $4,000 over the national average. That is $16,000+ for a family of four. No wonder people thought of Minnesota as the most successful of blue (or mostly blue, anyway) states.

But in 2014, an ascendant Democratic Party enacted a massive tax increase that brought Minnesota’s top personal income tax rate to just under 10%. That caused the state’s economy to spiral downward. This chart shows Minnesota’s per capita GDP in comparison with the national average, which shows as 0 on the X axis:

In 2024, for the first time in its history, Minnesota became a below-average state, economically. Its per capita GDP is now below the national average.

Not only that: Minnesota is the only state whose per capita GDP growth has trailed the nation’s for every one of the last ten years. Ten years in a row of failure; the worst record of any state.

As a result of lack of opportunity in Minnesota, driven in part by an exodus of entrepreneurs and lack of job creation, people are leaving the state–and, just as important, not moving into it. This chart tells the story: Minnesota gains residents in the income category 0-$25,000 on account of its lavish welfare benefits, and loses residents to other states, on a net basis, in every income category over $25,000:

Minnesota’s decline began under Governor Mark Dayton and has accelerated during Tim Walz’s six-plus years in office. Walz’s administration has been a disaster for the people of Minnesota, but it appears that he will run for a third term in 2026. Republicans are lining up to oppose him, but no Republican has won a statewide race in Minnesota since 2006, even though more Minnesotans describe themselves as conservative than liberal.

The point of all this is that there are no exceptions to the rule that liberal policies always fail, and impoverish the people who are subjected to them. None.

The charts above are from the presentation that we at American Experiment are putting on during this year’s Summer Tour of Minnesota, titled “Minnesota DOGE: Cut the Waste, Save the Budget.” If you live nearby, you can see upcoming tour dates and locations here. I think we have done six tour events so far.

https://www.powerlineblog.com/archives/2025/06/blue-state-in-free-fall.php