TD Cowen analyst Ryan Langston has left Encompass Health Corporation at the top of his small- and mid-cap list following the company’s fiscal 2026 second-quarter results, which combined volume gains with an earnings beat despite a modest headwind.
Quarterly performance highlights
- Adjusted EBITDA: Encompass Health reported adjusted EBITDA of $348 million for the quarter, beating consensus estimates by 3% despite absorbing an $11.5 million year-over-year headwind from net supplemental discharge payments.
- Same-store volumes: Same-store volume growth reached 2.8% year-over-year, above the consensus estimate of 2.0% and nearly in line with TD Cowen’s 2.9% projection.
- Revenue: Revenue totaled $1.597 billion, up 10% year-over-year and 2% ahead of both consensus and TD Cowen estimates.
- Adjusted EPS: Adjusted earnings per share were $1.55, an 11% increase year-over-year and ahead of the analyst consensus of $1.49.
Guidance and capital allocation
Management raised full-year 2026 adjusted EBITDA guidance by $15 million at both the low and high ends of the range, which corresponds to a 1.1% increase at the midpoint. The company also increased its full-year revenue guidance to a range of $6.410 billion to $6.490 billion, up from the prior range of $6.375 billion to $6.470 billion.
Alongside the upgraded outlook, the board authorized a new $1 billion share repurchase program, a move the company said reflects confidence in its balance sheet flexibility.
Operational metrics and drivers
- Total year-over-year discharge growth was 5.6%, exceeding estimates.
- Same-store discharge growth of 2.8% outperformed consensus despite tougher year-over-year comparisons and ongoing facility consolidations.
- The company added 100 beds during the quarter through a mix of expansions within existing facilities and new openings.
- Revenue per discharge rose 3.9%, also beating expectations.
In a corporate update, Encompass Health attributed the quarterly outperformance to high patient demand, improved occupancy and lower costs associated with premium labor.
Analyst stance
Following the results and the revised guidance, TD Cowen’s Ryan Langston maintained Encompass Health as his top pick in the small- and mid-cap universe, reflecting the combination of volume momentum, margin resilience and shareholder-friendly capital allocation reflected in the repurchase program.
Note: The factual details in this report reflect the company’s reported metrics for the second quarter of fiscal 2026 and the accompanying guidance adjustments and capital actions described by management.