Encompass Health (EHC) Stock Forecast & Price Target

Encompass Health Corp has demonstrated a positive trajectory in revenue guidance, with the high-end outlook for 2024 increasing from $1.065 billion to $1.090 billion following the 3Q24 earnings report, reflecting strong financial performance. Additionally, the firm showed an upward revision in 2023 guidance from $910 million to $950 million, indicating positive growth momentum year over year. Furthermore, the company's Medicare Advantage payer mix has significantly improved from approximately 9.2% in 2018 to around 16.5% by early 2025, highlighting its capacity to leverage favorable discharge growth rates compared to traditional fee-for-service Medicare.

Encompass Health Corp faces significant challenges related to its de novo and joint venture strategies, particularly concerning rising construction and labor acquisition costs amid tariff-related uncertainties and competitive labor markets. These factors contribute to risks that could hinder the company's ability to successfully staff and ramp up new facilities to mature operating levels, potentially disrupting its earnings profile. Additionally, the company’s reliance on inpatient rehabilitation services, which constitutes the majority of its revenue, may be adversely affected by these operational risks, leading to a cautious outlook on its financial performance.