EarningsQ3 2026 Earnings Report
DE:HSOA Q3 2026 EPS Results
Actual EPS€1.36
Consensus EPS€1.22
Beat/MissBeat by +€0.14
One Year Ago EPS€1.10
DE:HSOA Q3 2026 Revenue Results
Actual Revenue€1.44B
Expected Revenue€1.43B
Beat/MissBeat by +€7.01M
YoY Revenue Growth+8.93%
Earnings Announcement Details
QuarterQ3 2026
Date10/28/2026
TimeAfter Close
Conference CallWednesday, October 28, 2026
DE:HSOA Upcoming Earnings
Encompass Health's next earnings date is estimated for February 11, 2027, based on past reporting schedules.
Q3 2026 Earnings Call Audio
DE:HSOA Q3 2026 Earnings Call
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Q3 2026 Earnings Slide Deck
Q3 2026 Earnings Call Summary
Earnings Call Sentiment|Positive
The call was strongly positive overall. The company reported broad-based revenue, EBITDA, EPS, cash flow, volume, acuity, staffing, and capacity growth, raised 2026 guidance again, and highlighted favorable demand, clinical outcomes, development opportunities, and capital flexibility. The main challenges were higher bad debt from a one-time system conversion, lower Medicaid supplemental payment contributions, pending Florida CMS approval, elevated pre-opening costs, Medicare Advantage discharge pressure, capacity constraints, and administrative uncertainty around RCD expansion. Management characterized several of these issues as one-time, temporary, or manageable, while the number and strength of the highlighted achievements significantly outweighed the stated challenges.Company Guidance
Strong Third-Quarter and Year-to-Date Financial Growth
Third-quarter revenue grew 8.9%, adjusted EBITDA increased 15.5% to $346.6 million, and adjusted EPS increased 23.6%. For the first 9 months of 2026, revenue rose 9.2%, adjusted EBITDA increased 11.9%, and adjusted EPS increased 17%.
2026 Guidance Raised Again
Based primarily on third-quarter results, the company raised 2026 guidance to net operating revenue of $6.45 billion to $6.5 billion, adjusted EBITDA of $1.395 billion to $1.415 billion, and adjusted EPS of $6.23 to $6.37.
Strong Patient Outcomes and External Recognition
Third-quarter discharge-to-community was 84.7%, discharge-to-acute was 8.4%, and discharge-to-SNF was 6.2%; management said each metric exceeded industry averages. Newsweek named Encompass Health America's most awarded leader in inpatient rehabilitation for the seventh consecutive year, and NRC Health placed the company among the top 3 large health systems nationwide for patient experience for the second consecutive year.
Clinical Certifications and Stroke Leadership
Encompass Health holds 408 Joint Commission disease-specific certifications, including 150 stroke certifications, representing approximately 65% of total stroke certifications among all providers. Through the first three quarters of 2026, the company treated 37,620 stroke patients, approximately 18% of its patient mix, and management said it treats more stroke patients than any other inpatient rehabilitation provider.
Revenue Growth Driven by Volume, Pricing, and Acuity
Third-quarter revenue growth of 8.9% was driven by 5.7% discharge growth and a 4% increase in net revenue per discharge. Net revenue per discharge benefited from higher patient acuity.
Capacity Expansion Continued
In the third quarter, the company opened a new 50-bed hospital in Norristown, Pennsylvania and added 31 beds to existing hospitals. Through the third quarter, it had opened 4 hospitals totaling 189 beds and added 85 beds to existing hospitals. Earlier in October, it opened 50-bed hospitals in Bangor, Maine and San Antonio, Texas and added 60 beds to existing hospitals. It intends to open 2 more hospitals totaling 100 beds and add up to 45 beds to existing hospitals over the balance of 2026.
Large Development Pipeline and 2027 Expansion Plans
The announced pipeline beyond 2026 consists of 15 hospitals with 654 beds, including the first 2 small-format hospitals in Conroe and Richmond, Texas. The company expects to add 150 to 200 beds to existing hospitals in 2027 and is guiding to 6 to 10 hospitals per year, inclusive of North Carolina, with potential to reach the top of that range and exceed it in outer years.
North Carolina Development Opportunity
North Carolina's repeal of its Certificate of Need law became effective October 1. Encompass Health currently operates 1 hospital in the state, has prioritized 15 markets for development, and has 6 real estate parcels under contract.
Favorable Demand and Demographic Trends
Management said demand for inpatient rehabilitation remains strong and growing. In counties where Encompass Health has a presence, the Medicare beneficiary population increased by almost 0.5 million from September 2025 to September 2026, with slightly more than 50% in fee-for-service Medicare.
VA Volume Growth
VA volume increased 21% in the third quarter, marking the sixth consecutive quarter of at least 20% growth. This followed 26.4% growth in the third quarter of 2025, and management said there remains substantial variability in VA population capture by region and hospital.
Medicare Advantage Admit-and-Appeal Results
Of 294 Medicare Advantage claims processed through the admit-and-appeal strategy, 87% were overturned in Encompass Health's favor and 81% were overturned before reaching the administrative law judge. Medicare Advantage discharge growth in the 9 pilot markets was 36%, and the company is expanding the stroke program across every hospital and payer, increasing pilot hospitals from 9 to 13.
Higher-Acuity Mix and Diagnosis Growth
Third-quarter growth included 9.3% in the neuro rehabilitation impairment category, 5.1% in stroke, 5.7% in brain injury, and 10.3% in major trauma. On a two-year same-store basis, brain injury was up 9.8%, neuro was up 8.5%, and stroke and major trauma were each up 5.7%. Management said higher-acuity volume helped backfill lower-acuity volume.
Labor Cost and Staffing Improvements
Premium labor costs declined $3.9 million year over year to $23.1 million, marking 16 consecutive quarters of year-over-year reductions. Contract labor FTEs were 0.9% of total FTEs, down 30 basis points year over year and the lowest level since the fourth quarter of 2020. Net full-time RN hires through three quarters exceeded the level in each of the last 5 calendar years.
Career Ladder Participation Expanded
Career ladder participation reached 55% of eligible nurses, representing approximately 31% of all full-time nurses. Management said participation in the programs continues to support the company's ability to serve high-acuity, medically complex patients.
Strong Cash Flow and Capital Returns
Adjusted free cash flow for the first 9 months of 2026 was $634.2 million, up 8.9% from the comparable 2025 period. The company repurchased approximately 495,000 shares for $57.9 million in the third quarter, bringing year-to-date repurchases to approximately 1.91 million shares and $203.7 million. It also declared a $0.21-per-share cash dividend.
Favorable Leverage and Liquidity
Net leverage was 1.8x at quarter end, and the company had approximately $870 million available on its $1 billion revolving credit facility. During the quarter, it issued an incremental $100 million of senior notes as an add-on to its 5.875% notes due in 2034, bringing that series to $600 million.
Small-Format Hospital Return Targets
Management is targeting approximately 20% IRRs for small-format hospitals, with estimated cost per bed of about $1 million. This compares with mid-teens IRRs and roughly $1.25 million per bed for de novo hospitals and IRRs of 25% or higher with approximately $850,000 per bed for bed expansions.
New Hospital Ramp Performance
New de novo hospitals are generally achieving four-wall positive EBITDA by about month 6, exceeding 70% occupancy by about month 10, and reaching full maturity and typically qualifying for a bed addition between year 3 and year 4. Management said the current class of openings is tracking in accordance with recent historical performance.
Increasing Private-Room Mix
Private rooms represented 58% of capacity at the end of the third quarter, up from 41% in 2020. Bed additions, de novo hospitals, and small-format hospitals are expected to be 100% single occupancy, which management said will continue to increase the private-room percentage.
RCD Compliance Confidence
Management said it has a high degree of confidence that hospitals entering the expanded RCD program will exceed the 80% target affirmation rate based on experience to date. Hospitals that exceed the target during cycle 1 can move from 100% prepayment claim review to a 5% spot check beginning July 1.
DE:HSOA Earnings History
The table shows recent earnings report dates and whether the forecast was beat or missed. See the change in forecast and EPS from the previous year.
Beat
Missed