Encompass Health Corporation Just Beat EPS By 20%: Here's What Analysts Think Will Happen Next

Encompass Health Corporation (NYSE:EHC) just released its latest quarterly results and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.4% to hit US$1.3b. Encompass Health reported statutory earnings per share (EPS) US$1.10, which was a notable 20% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Encompass Health

Taking into account the latest results, the current consensus from Encompass Health's ten analysts is for revenues of US$5.28b in 2024. This would reflect a satisfactory 6.6% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to increase 3.2% to US$3.99. In the lead-up to this report, the analysts had been modelling revenues of US$5.26b and earnings per share (EPS) of US$3.90 in 2024. So the consensus seems to have become somewhat more optimistic on Encompass Health's earnings potential following these results.

The consensus price target was unchanged at US$91.91, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Encompass Health analyst has a price target of US$108 per share, while the most pessimistic values it at US$83.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Encompass Health's rate of growth is expected to accelerate meaningfully, with the forecast 8.9% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 0.8% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.7% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Encompass Health is expected to grow much faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Encompass Health's earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$91.91, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Encompass Health going out to 2026, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 1 warning sign for Encompass Health that you need to be mindful of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.