Encompass Health Raises 2026 Revenue Outlook to $6.5 Billion After Earnings Growth
Key Facts
Encompass Health raised its 2026 net operating revenue guidance to a range of $6.450–$6.500 billion, from $6.410–$6.490 billion, after reporting third-quarter results. The company also raised its guidance for adjusted EBITDA to $1.395–$1.415 billion and adjusted earnings per share to $6.23–$6.37. The revision came as quarterly net operating revenue rose to $1.6095 billion, up 8.9% from $1.4775 billion in the same period of 2025. Adjusted EBITDA increased 15.5% to $346.6 million, while adjusted earnings per share rose 23.6% to $1.52 from $1.23. According to Investing.com, adjusted earnings per share exceeded analysts’ estimate of $1.36, while revenue was $1.61 billion against an estimate of $1.60 billion.
Third-quarter results showed higher operating activity and cash flow. Hospital discharges totaled 69,605, up 5.7% from 65,839 a year earlier, while same-hospital discharges grew 3.0%. Net patient revenue per discharge rose to $22,543 from $21,679, an increase of 4.0% year over year. Cash flow from operating activities was $362 million, up 33.7% from the year-ago period. Adjusted free cash flow was also $263.4 million, up 51.2% from $174.2 million.
For the nine months ended September 30, 2026, net operating revenue increased 9.2% to $4.7935 billion, compared with $4.3906 billion in the same period a year earlier. Adjusted EBITDA was $1.0434 billion, up 11.9% from $932.3 million. Adjusted earnings per share also rose to $4.67 from $3.99, an increase of 17.0%. The comparison shows revenue growth accompanied by larger increases in adjusted earnings and earnings per share over the period. In the second quarter of 2026, revenue had increased 9.6% to $1.5974 billion, while adjusted EBITDA rose 9.2% to $348 million.
The company expanded capacity during the first nine months of the year, opening four hospitals with a total of 189 beds and adding 85 beds to existing hospitals. CEO Mark Tarr said the steps reflect the company’s commitment to meeting “growing demand for high-quality inpatient rehabilitation services.” The company’s network includes 179 hospitals in 39 states and Puerto Rico, according to its third-quarter results statement. In August, Tarr said the company expected to open five additional hospitals and add more than 100 beds to existing facilities before the end of 2026. The figures show the ongoing expansion alongside quarterly discharge growth, while the company’s statement does not break out each one’s contribution to quarterly revenue.
The company says it plans to invest free cash flow in opening 6 to 10 new hospitals and adding 80 to 120 beds to existing hospitals each year through 2027. This follows an increase in third-quarter adjusted free cash flow to $263.4 million, according to the company’s results. In August, Encompass Health raised its 2026 revenue outlook to $6.410–$6.490 billion from a previous range of $6.375–$6.470 billion; the latest revision then lifted the range to $6.450–$6.500 billion. Factors the company cited as potentially affecting future results include changes in Medicaid reimbursement, labor costs, and changes, delays or suspensions in payments from government and private payers. The company is scheduled to hold a conference call to discuss third-quarter results on October 29, 2026, at 10:00 a.m. Eastern Time.
Following the results announcement, the stock rose 5.58% to $128.91 in after-hours trading on October 29, compared with the previous close of $122.09, according to Investing.com. EL7 data recorded EHC shares closing at $122.09 on October 28. The stock move came after adjusted earnings per share topped analyst estimates, while revenue exceeded their estimate by a narrow margin. The company also announced higher ranges for its 2026 fiscal-year revenue and adjusted earnings outlook. The updated guidance combines quarterly revenue expansion, adjusted earnings growth and improved cash flow with plans to add hospitals and beds.