Encompass Health (EHC) Stock Forecast & Price Target

Encompass Health Corp has demonstrated robust financial performance, highlighted by a 14% year-over-year growth in EBITDA for the fourth quarter, exceeding market expectations by 7%, driven primarily by strong same-store volume growth. The company reported a notable increase in Medicare and Medicare Advantage volumes, between 6.8% and 14.7%, contributing to an anticipated 6% growth in same-store volumes for 2024—the fastest rate observed excluding COVID comparisons. Furthermore, the firm is poised for continued revenue growth, with an upward revision of its 2025 estimated revenue to $5.853 billion, reflecting a confident outlook based on strong operational metrics.

Encompass Health Corporation is anticipating a decline in cash flow of approximately $50 million year-over-year, driven mainly by increased capital expenditures related to capacity expansions and higher de novo spending, leading to concerns about future profitability. Additionally, the company's guidance indicates a contraction in EBITDA margin to 20.2% due to ongoing labor pressures, elevated pre-opening costs, and challenges related to the implementation of new systems, further compounding financial strain. Furthermore, significant investment risks exist, including regulatory uncertainties, operational challenges, staffing shortages, and wage inflation, all of which could hinder Encompass Health’s financial performance moving forward.