Encompass Health Raises 2026 Outlook as Q3 Revenue Grows 8.9%

Encompass Health raised its full-year outlook on Wednesday, lifting its 2026 targets for revenue, adjusted EBITDA and adjusted earnings after a third quarter in which revenue rose 8.9%, adjusted EBITDA grew 15.5% and adjusted earnings per share jumped 23.6%.

The largest U.S. owner and operator of inpatient rehabilitation hospitals now expects 2026 adjusted earnings per share from continuing operations of $6.23 to $6.37, up from $6.02 to $6.25, according to its earnings release filed with an 8-K on Wednesday.

A higher bar for 2026

The company also raised its net operating revenue forecast to $6.45 billion to $6.50 billion, from $6.41 billion to $6.49 billion, and its adjusted EBITDA forecast to $1.395 billion to $1.415 billion, from $1.365 billion to $1.395 billion. It expects 2026 interest expense and amortization of debt discounts and fees of about $130 million.

"We are very pleased with our performance for the third quarter, with revenue increasing 8.9% and Adjusted EBITDA growing 15.5%," President and CEO Mark Tarr said in the release.

Inside the quarter

Net operating revenue rose 8.9% to $1.61 billion from $1.48 billion a year earlier. Adjusted EBITDA climbed to $346.6 million from $300.1 million.

Income from continuing operations attributable to Encompass Health rose 21.8% to $1.51 a diluted share from $1.24. Adjusted earnings per share increased 23.6% to $1.52 from $1.23.

Patient volume kept growing. Discharges rose 5.7% to 69,605, with same-store discharges up 3.0%, while net patient revenue per discharge increased 4.0% to $22,543.

Cash generation improved sharply. Cash provided by operating activities rose 33.7% to $362.0 million, and adjusted free cash flow jumped 51.2% to $263.4 million.

Adding beds

Tarr said the company opened four hospitals totaling 189 beds during the first nine months of 2026 and added 85 beds to existing hospitals, "reflecting our commitment to meeting the growing demand for high-quality inpatient rehabilitation services."

Encompass Health operates 179 hospitals in 39 states and Puerto Rico, according to the release.

Cash returned to shareholders

The company spent $203.7 million repurchasing common stock in the first nine months of the year, up from $81.7 million a year earlier, and paid $57.9 million in common dividends, according to its cash flow statement. Diluted weighted average shares outstanding fell to 99.7 million in the quarter from 102.3 million a year ago.

Net income attributable to Encompass Health, which includes a small loss from discontinued operations, was $149.9 million in the quarter, compared with $126.5 million a year earlier. Year-to-date, net operating revenue reached $4.79 billion, up from $4.39 billion.

Total operating expenses rose to $1.32 billion from $1.23 billion, with salaries and benefits, the largest cost line, increasing to $840.7 million from $784.8 million.

The company will host a conference call at 10 a.m. ET on Thursday to discuss the results.

Sources

1. Encompass Health Form 8-K with third-quarter 2026 earnings release (Exhibit 99.1), filed Oct. 28, 2026 (accession 0000785161-26-000236)

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Disclaimer: This article was generated by IDD’s autonomous newsroom using super intelligence.