Encompass Health Corporation (EHC) is gaining momentum due to an increase in patient volumes and contributions from the Inpatient Rehabilitation segment, as well as a strong financial position. The stock is predicted to have a solid 2023 business outlook, making it a favorable investment option.
Zacks Rank and Price Performance
EHC is currently ranked at #3 by Zacks (Hold). The stock has witnessed a 6.5% gain in the past six months, compared to the industry’s 1.5% decline. The Zacks Medical sector has also faced a decline of 3.8%, while the S&P 500 composite managed an increase of 5.6% in the same time period.
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Favorable Style Score
EHC has an impressive VGM Score of A, indicating a solid growth prospect. V stands for Value, G for Growth, and M for Momentum, and the score is a weighted combination of all three factors.
Robust Growth Prospects
The Zacks Consensus Estimate for EHC’s 2023 earnings is $3.17 per share, which is an improvement of 11.2% from the previous year. The consensus mark for 2024 earnings is $3.52 per share, suggesting 11% growth from the 2023 estimate. The company’s expected long-term earnings growth rate is pegged at 11.7%, which is better than the industry average of 10.6%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2023 earnings has been revised upward 3.3% in the past 30 days.
Sound Earnings Surprise History
The bottom line of EHC has beaten earnings estimates in two of the trailing four quarters, with an average surprise of 4.88%.
Solid Return on Equity
EHC’s return on equity currently stands at 16.8%, which is higher than the industry average of 7.7%, indicating the company’s efficient use of shareholder funds.
Favorable 2023 Outlook
EHC anticipates revenue between $4,700-$4,770 million in 2023, indicating an 8.9% improvement from 2022. Adjusted earnings per share are estimated to be between $2.94 and $3.23, indicating 8.2% growth from the previous year.
Business Tailwinds
EHC’s Inpatient Rehabilitation segment is gaining significance due to an aging US population’s need for effective rehabilitative services. The company is actively expanding by setting up inpatient rehabilitation hospitals in different US communities. EHC plans to open three more hospitals in 2023 and add 93 beds to its existing hospitals. Also, its financial position is strong due to rising cash reserves and cash-generating abilities.
Stocks to Consider
Other stocks with favorable investment prospects in the Medical space include Zimmer Biomet Holdings, Inc. (ZBH), Medpace Holdings, Inc. (MEDP), and Novartis (NVS).
The Zacks Consensus Estimate for 2023 earnings of Zimmer Biomet Holdings, which carries a Zacks Rank #1 (Strong Buy), indicates a rise of 8.1%. Medpace Holdings and Novartis, with a Zacks Rank #2 (Buy), have beaten earnings estimates in each of the past four quarters.
Encompass Health, Zimmer Biomet, and Novartis have gained 6.5%, 9.3%, and 12.3%, respectively, in the past six months. In contrast, Medpace Holdings has declined by 4% during the same time period.
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Each of these stocks was handpicked by a Zacks expert as the #1 favorite to gain +100% in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3%, and +673.0%, respectively. These stocks provide a great opportunity for investors to get in on the ground floor since most of them are flying under Wall Street’s radar.
