Encompass Health Raises 2026 Outlook on Strong Q1 Results and New Hospital Openings

Revenue and earnings outlook upgraded

The company now expects 2026 net operating revenue of $6.375 billion to $6.470 billion, up from the prior $6.365 billion‑$6.465 billion range. Adjusted EBITDA guidance was nudged to $1.35 billion‑$1.38 billion, and adjusted earnings per share are projected at $5.89‑$6.11, versus the earlier $5.81‑$6.10 window. Management attributes the lift to robust demand for post‑acute care, higher net patient revenue per discharge (now $22,633, a 3.7% YoY rise), and the rollout of new beds.

Q1 performance beats expectations

For the quarter ended March 31, 2026, Encompass posted $1.586 billion in net operating revenue, up 9.0% year‑over‑year, and income from continuing operations of $1.77 per diluted share, a 19.6% increase. Adjusted EPS rose 16.8% to $1.60, while adjusted EBITDA climbed 11.2% to $348.8 million. Operating cash flow improved 8.5% to $313.1 million, though adjusted free cash flow turned negative at $193.8 million, a 12.9% decline, reflecting continued capital deployment.

Strategic expansion in full swing

Encompass opened a 49‑bed acute‑care hospital in Irmo, SC and added 44 beds across existing facilities during Q1. The company now targets eight new hospitals in 2026, adding 389 beds, and plans to expand existing sites by roughly 175 beds. These moves are designed to capture growing demand for specialty and outpatient services and to improve same‑store discharge growth, which posted a modest 1.6% increase.

Balance sheet remains solid

As of March 31, total assets stood at $7.313 billion against $3.946 billion in liabilities, leaving shareholders’ equity at $3.308 billion. Cash and cash equivalents total $110.5 million, with $52.9 million in restricted cash. The firm repaid $330 million of revolving‑credit borrowings and repurchased $71.6 million of common stock, signaling confidence in its capital position.

Market reaction

Despite the upbeat guidance, EHC shares slipped 2.26% in after‑hours trading, reflecting broader market weakness (S&P 500 up 1.08%). The stock’s RSI of 24 suggests it may be oversold, leaving room for a potential rebound if the expansion plan materializes.

Forward‑looking statements

The filing includes customary forward‑looking language, noting that actual results could differ due to factors such as construction timelines, reimbursement rates, and macro‑economic conditions. An earnings call is scheduled for May 1, 2026 at 10:00 a.m. ET.