Yahoo Finance Encompass Health (EHC) Up 32% in 6 Months: More Room to Run?
Shares of Encompass Health Corporation EHC have gained 31.9% in the past six months compared with the industry’s and Medical sector’s increases of 9.6% each. The S&P 500 composite index has gained 14.5% in the same time frame. With a market capitalization of $6.1 billion, the average volume of shares traded in the last three months was 0.9 million.
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Growing revenues, active expansion endeavors and a strong financial position continue to drive Encompass Health.
Return-on-equity (ROE) of this Zacks Rank #3 (Hold) inpatient rehabilitation hospital operator stands at 16.2% as of Dec 31, 2022, higher than the industry average of 5.3%. This underlines EHC’s efficiency in utilizing shareholders’ funds.
Can EHC Retain the Momentum?
The Zacks Consensus Estimate for Encompass Health’s 2023 earnings is pegged at $3.07 per share, indicating a 7.7% increase from the prior-year reported figure. The consensus mark for 2024 earnings stands at $3.50 per share, suggesting a 14% growth from the 2023 estimate.
The expected long-term earnings growth rate is pegged at 14%, better than the industry’s average of 12.6%.
Revenues of Encompass Health continue to benefit from solid contributions from its Inpatient Rehabilitation segment, which in turn, is driven by growing patient volumes and favorable pricing. Management anticipates revenues to lie within $4,680-$4,760 million, the mid-point of which indicates 8.5% growth from the 2022 figure. It aims to achieve long-term revenue growth of 8% to 10% over the 2020-2025 period.
Solid demand for the rehabilitative care services of Encompass Health is likely to continue, considering an aging U.S. population and the importance of such services that enable patients to resume their daily activities after an injury, illness or surgery.
In order to capitalize on the robust demand for its services, EHC remains quite active with expansion endeavors. Through these initiatives, the healthcare provider unveils plans to set up inpatient rehabilitation hospitals to reach areas grappling with inadequate care access and inaugurate the same within a reasonable timeline.
Presently, Encompass Health operates 156 inpatient rehabilitation hospitals located across 37 states and Puerto Rico. This year, it targets to open eight hospitals. The expansion initiatives of EHC also come in the form of increasing the bed count of its existing facilities. It aims to add 80-100 beds to its existing facilities in 2023.
The financial position of a company like Encompass Health needs to be very strong in order to handle such uninterrupted growth investments. Case in point, it boasts a sound cash balance and solid cash-generating abilities. A source of additional liquidity in the form of a $1 billion revolving credit facility, out of which $912 million remained for borrowing as of Dec 31, 2022, also bodes well.
Stocks to Consider
Some top-ranked stocks in the Medical space are Henry Schein, Inc. HSIC, Cytek Biosciences, Inc. CTKB and Stryker Corporation SYK. While Henry Schein sports a Zacks Rank #1 (Strong Buy), Cytek Biosciences and Stryker carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Henry Schein’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and matched the mark once, the average beat being 2.97%. The Zacks Consensus Estimate for HSIC’s 2023 earnings suggests an improvement of 10.6%, while the same for revenues indicates growth of 1.6% from the respective year-ago reported figures.
The Zacks Consensus Estimate for HSIC’s 2023 earnings has moved 6.8% north in the past 60 days. Shares of Henry Schein have gained 27.6% in the past six months.
The bottom line of Cytek Biosciences outpaced the Zacks Consensus Estimate in three of the trailing four quarters and matched the mark once, the average being 47.50%. The Zacks Consensus Estimate for CTKB’s 2023 earnings implies a rise of 66.7%, while the same for revenues indicates growth of 39.4% from the respective year-ago reported figures.
The Zacks Consensus Estimate for CTKB’s 2023 earnings has moved 38.9% north in the past 30 days. Shares of Cytek Biosciences have declined 36.4% in the past six months.
Stryker’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed the mark twice, the average being 0.37%. The Zacks Consensus Estimate for SYK’s 2023 earnings indicates a rise of 7.3%, while the same for revenues suggests an improvement of 7% from the corresponding year-ago reported estimates.
The Zacks Consensus Estimate for SYK’s 2023 earnings has moved 0.2% north in the past 60 days. Shares of Stryker have gained 38.2% in the past six months.
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