Encompass Health Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Explore Encompass Health's Fair Values from the Community and select yours

Encompass Health Corporation (NYSE:EHC) just released its quarterly report and things are looking bullish. Encompass Health beat earnings, with revenues hitting US$1.5b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 16%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

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Following the latest results, Encompass Health's twelve analysts are now forecasting revenues of US$5.93b in 2025. This would be a modest 4.5% improvement in revenue compared to the last 12 months. Statutory per share are forecast to be US$5.25, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of US$5.89b and earnings per share (EPS) of US$5.02 in 2025. So the consensus seems to have become somewhat more optimistic on Encompass Health's earnings potential following these results.

Check out our latest analysis for Encompass Health

There's been no major changes to the consensus price target of US$135, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Encompass Health, with the most bullish analyst valuing it at US$145 and the most bearish at US$125 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Encompass Health's growth to accelerate, with the forecast 9.3% annualised growth to the end of 2025 ranking favourably alongside historical growth of 5.8% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.9% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Encompass Health is expected to grow much faster than its industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Encompass Health following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target held steady at US$135, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Encompass Health. Long-term earnings power is much more important than next year's profits. We have forecasts for Encompass Health going out to 2027, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Encompass Health , and understanding it should be part of your investment process.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.