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Encompass Health (EHC) Up 29.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Encompass Health (EHC - Free Report) . Shares have added about 29.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Encompass Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Encompass Health Q3 Earnings Beat Estimates
Encompass Health’s earnings of 78 cents per share beat the Zacks Consensus Estimate by 4% but declined 16.1% year over year. This year-over-year downside was due to increase in expenses that outgrew the rise in revenues.
Revenues of $1.17 billion missed the Zacks Consensus Estimate by 0.35% but the same inched up 1.1% year over year. Revenue growth resulted from a favorable pricing in the inpatient rehabilitation segment.
This was partly offset by lower volumes in the inpatient rehabilitation segment, and home health and hospice segment along with a pricing decrease in the second segment.
Adjusted EBITDA of $230.2 million dipped 0.6% year over year.
Segmental Results
Inpatient rehabilitation segment’s revenues of $899.4 million were up 3.1% year over year due to a 3.1% increase in revenues from Inpatient business and a 25.3% decline in revenues from Outpatient and other business. Adjusted EBITDA of $209.2 million dipped 0.7% year over year due to adverse impacts of COVID-19 pandemic.
Home Health and Hospice segment’s revenues of $274.5 million were down 5.1% year over year due to 6.5% lower revenues from Home Health sub-segment, partly mitigated by 1.6% growth in Hospice sub-segment.
Adjusted EBITDA of $51.8 million was up 2% year over year owing to a decrease in cost of services as a percentage of revenues.
Financial Update
Adjusted free cash flow in the third quarter increased 13.2% to $124.1 million.
As of Sep 30, 2020, the company had almost $540 million in cash and roughly $964 million available under its $1-billion revolving credit facility. The company's leverage ratio at the end of the third quarter was 4.2X.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.61% due to these changes.
VGM Scores
At this time, Encompass Health has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Encompass Health has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Encompass Health (EHC) Up 29.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Encompass Health (EHC - Free Report) . Shares have added about 29.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Encompass Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Encompass Health Q3 Earnings Beat Estimates
Encompass Health’s earnings of 78 cents per share beat the Zacks Consensus Estimate by 4% but declined 16.1% year over year. This year-over-year downside was due to increase in expenses that outgrew the rise in revenues.
Revenues of $1.17 billion missed the Zacks Consensus Estimate by 0.35% but the same inched up 1.1% year over year. Revenue growth resulted from a favorable pricing in the inpatient rehabilitation segment.
This was partly offset by lower volumes in the inpatient rehabilitation segment, and home health and hospice segment along with a pricing decrease in the second segment.
Adjusted EBITDA of $230.2 million dipped 0.6% year over year.
Segmental Results
Inpatient rehabilitation segment’s revenues of $899.4 million were up 3.1% year over year due to a 3.1% increase in revenues from Inpatient business and a 25.3% decline in revenues from Outpatient and other business.
Adjusted EBITDA of $209.2 million dipped 0.7% year over year due to adverse impacts of COVID-19 pandemic.
Home Health and Hospice segment’s revenues of $274.5 million were down 5.1% year over year due to 6.5% lower revenues from Home Health sub-segment, partly mitigated by 1.6% growth in Hospice sub-segment.
Adjusted EBITDA of $51.8 million was up 2% year over year owing to a decrease in cost of services as a percentage of revenues.
Financial Update
Adjusted free cash flow in the third quarter increased 13.2% to $124.1 million.
As of Sep 30, 2020, the company had almost $540 million in cash and roughly $964 million available under its $1-billion revolving credit facility. The company's leverage ratio at the end of the third quarter was 4.2X.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.61% due to these changes.
VGM Scores
At this time, Encompass Health has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Encompass Health has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.