Here's Why Encompass Health Can Be a Smart Addition to Your Portfolio

Encompass Health Corporation EHC is well-positioned for growth, supported by rising demand for inpatient rehabilitation services, higher patient acuity and continued investments in expanding its hospital capacity. The company has gained 13.9% over the past six-month period, outperforming the industry average of 11.2%.

Encompass Health — with a market cap of $12 billion — offers facility-based patient care through its network of inpatient rehabilitation hospitals. The company has a national footprint that includes 176 hospitals across 39 states and Puerto Rico. Its forward P/E ratio of 18.92X is lower than the industry average of 19.27X.

Courtesy of solid prospects, Encompass Health currently carries a Zacks Rank #2 (Buy) and a Growth Score of B.

Where Do EHC’s Estimates Stand?

The Zacks Consensus Estimate for Encompass Health’s 2026 earnings is pegged at $6.04 per share, indicating a 10.8% year-over-year rise. In the past 30 days, it has witnessed five upward estimate revisions against none in the opposite direction. Furthermore, the consensus mark for revenues is pegged at $6.5 billion for 2026, implying an 8.8% year-over-year increase.

It beat earnings estimates in each of the past four quarters with an average surprise of 6.8%.

Encompass Health Corporation Price, Consensus and EPS Surprise

Encompass Health Corporation price-consensus-eps-surprise-chart | Encompass Health Corporation Quote

EHC’s Growth Drivers

Encompass Health’s growth is being supported by rising demand for inpatient rehabilitation and a favorable shift toward higher-acuity patients. In the second quarter of 2026, revenues increased 9.6% year over year, driven by 5.6% growth in discharges and a 3.9% increase in net revenue per discharge. Medically complex categories remained strong, with growth in same-store stroke and brain injury volumes. System-wide occupancy also reached 77.4%, up 290 basis points year over year, supporting better utilization of the company’s growing hospital network.

Capacity expansion remains a key part of Encompass Health’s long-term growth strategy. The company opened three hospitals totaling 139 beds during the first half of 2026 and plans to open another five hospitals with 250 beds while adding 100-150 beds to existing facilities during the remainder of the year. Beyond 2026, the development pipeline currently includes 13 hospitals with 606 beds. North Carolina is emerging as an additional growth market following the repeal of its inpatient rehabilitation Certificate of Need law.

Workforce development and care-access initiatives are also supporting Encompass Health’s growth. Its clinical career ladder programs are helping improve staff retention, reduce reliance on premium labor and strengthen its ability to care for higher-acuity patients. The company is also expanding its VA business and testing initiatives such as its admit and appeal program, which could create additional growth opportunities.

The company’s financial stability is reinforced by its strong liquidity position and robust cash flow generation. As of June 30, 2025, Encompass Health held $107.7 million in cash and cash equivalents, up 49.2% from the 2025-end level. Operating cash flows increased 17.2% year over year in 2025 and 6.6% in the first half of 2026.

The company boasts a favorable trailing 12-month return on invested capital of 10.1%, surpassing the industry average of 7.1%. EHC increased its 2026 net operating revenue forecast, now to be in the range of $6.41-$6.49 billion. It also increased its adjusted EPS guidance to be between $6.02 and $6.25.

EHC: Risks to Watch

There are some factors, however, that investors should keep a careful eye on.

The company’s operating expenses escalated over the last several years due to higher salaries and benefits expenses. Total expenses increased 10.8% in 2024 and 8.3% year over year in 2025, along with 8.1% and 9.2% in the first quarter and second quarter of 2026, respectively. The persistent escalation of expenses might weigh on its margin growth.

The company carries a significant long-term debt, net of the current portion, which amounted to $2.6 billion at the end of the second quarter. This leads to a net debt-to-capitalization of 41.4%, higher than the industry average of 37.6%.

Other Stocks to Consider

Some other top-ranked stocks in the Medical space are BrightSpring Health Services, Inc. BTSG, Globus Medical, Inc. GMED and Centene Corporation CNC, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BrightSpring Health Services’ current-year earnings of $1.78 per share has witnessed five upward revisions in the past 30 days against no movement in the opposite direction. BTSG beat earnings estimates in three of the trailing four quarters and missed once, with the average surprise being 16.1%. The consensus estimate for current-year revenues is pegged at $15.2 billion, suggesting 18.1% year-over-year growth.

The Zacks Consensus Estimate for Globus Medical’s current-year earnings of $4.93 per share has witnessed three upward revisions in the past 30 days, against no movement in the opposite direction. GMED Pharmaceuticals beat earnings estimates in each of the trailing four quarters, with the average surprise being 27.9%. The consensus estimate for current-year revenues is pegged at $3.2 billion, suggesting 8.8% year-over-year growth.

The Zacks Consensus Estimate for Centene’s current-year earnings of $4.89 per share has witnessed nine upward revisions in the past 30 days, against no movement in the opposite direction. CNC beat earnings estimates in each of the trailing four quarters, with an average surprise of 151.3%. The consensus estimate for current-year revenues is pegged at $196.3 billion, suggesting 0.8% year-over-year growth.

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This article originally published on Zacks Investment Research (zacks.com).

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