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Shares of Encompass Health Corporation EHC have gained 41.8% in the past year compared with the industry’s 24.5% growth. The Medical sector grew 9.7% and the S&P 500 composite index rose 30.3% in the same time frame. With a market capitalization of $7.5 billion, the average volume of shares traded in the last three months was 0.6 million.

Growing patient volumes, joint ventures with healthcare organizations, an optimistic 2024 outlook and a commendable financial position continue to drive Encompass Health.

The leading rehabilitation hospital operator, presently carrying a Zacks Rank #3 (Hold), boasts an impressive track record of beating estimates in each of the trailing four quarters, with the average beat being 20.06%.

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Return on equity in the trailing 12 months is currently pegged at 17.7%, which is higher than the industry’s average of 7.6%. This substantiates the company’s efficiency in utilizing shareholders’ funds.

Can EHC Retain the Momentum?

The Zacks Consensus Estimate for Encompass Health’s 2024 earnings is pegged at $3.94 per share, which indicates a rise of 8.2% from the 2023 reported figure. Management expects the metric within $3.77-$4.06 for 2024. The consensus mark for revenues is $5.3 billion, suggesting 9.5% growth from the 2023 figure.

The Zacks Consensus Estimate for 2025 earnings is pegged at $4.41 per share, which indicates an improvement of 12% from the 2024 estimate. The consensus mark for revenues is $5.7 billion, implying an 8.3% uptick from the 2024 estimate.

Witnessing a 13-year CAGR of 7.4%, revenues of Encompass Health continue to benefit on the back of expanding patient volumes, which usually account for a significant chunk of any healthcare facility operator’s top line. Management forecasts revenues to lie within $5.2-$5.3 billion in 2024, the midpoint of which suggests 9.3% growth from the 2023 figure.

An aging U.S. population and solid demand for effective rehabilitative services, that empower individuals to resume daily activities, are expected to drive solid demand for inpatient rehabilitative services provided by EHC in the days ahead.

Encompass Health remains quite active on the expansion front throughout the year. The company’s expansion strategy discloses plans to set up inpatient rehabilitation hospitals across different U.S. communities, which will be made operable within a reasonable time. To complement its endeavor, EHC often takes the help of joint ventures and collaborates with renowned healthcare organizations to gain an in-depth knowledge of the diversified healthcare needs of a particular region.

The recently announced partnership of Encompass Health with the Georgia-based integrated health system, Piedmont Healthcare, to build a freestanding, inpatient rehabilitation hospital in the state, is one such joint venture. The healthcare services provider boasts an impressive count of 160 inpatient rehabilitation hospitals spread across 37 states and Puerto Rico. It plans to add six de novos and around 150 beds to its existing hospitals in 2024.

A solid financial position needs to be in place to pursue frequent business investments, which is exactly the case with Encompass Health. Growing cash reserves and adequate cash-generating abilities bear testament to its financial strength. Its cash and cash equivalents of $69.1 million increased more than three-fold from the 2022-end level as of Dec 31, 2023. EHC also generated operating cash flows of $850.8 million in 2023.

Encompass Health boasts an impressive VGM Score of A. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.

Stocks to Consider

Some better-ranked stocks in the Medical space are LeMaitre Vascular, Inc. LMAT, Addus HomeCare Corporation ADUS and DexCom, Inc. DXCM. While LeMaitre Vascular currently sports a Zacks Rank #1 (Strong Buy), Addus HomeCare and DexCom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LeMaitre Vascular’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 8.91%. The Zacks Consensus Estimate for LMAT’s 2024 earnings suggests an improvement of 21.5%, while the consensus mark for revenues indicates growth of 9.4% from the respective year-ago reported figures.

The consensus estimate for LMAT’s 2024 earnings has moved 8.6% north in the past 30 days. Shares of LeMaitre Vascular have gained 32.9% in the past year.

Addus HomeCare’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.52%. The Zacks Consensus Estimate for ADUS’ 2024 earnings indicates a rise of 5.7%, while the consensus mark for revenues suggests an improvement of 7.9% from the corresponding year-ago reported figures.

The consensus estimate for ADUS’ 2024 earnings has moved 2.1% north in the past 30 days. Shares of Addus HomeCare have declined 1% in the past year.

DexCom’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 32.81%. The Zacks Consensus Estimate for DXCM’s 2024 earnings indicates a rise of 15.8%, while the consensus mark for revenues suggests an improvement of 19.2% from the corresponding year-ago reported figures.

The Zacks Consensus Estimate for DXCM’s 2024 earnings has moved 1.1% north in the past 30 days. Shares of DexCom have rallied 14.1% in the past year.

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