Health care services provider Encompass Health (NYSE: EHC) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 9% year on year to $1.59 billion. The company expects the full year’s revenue to be around $6.42 billion, close to analysts’ estimates. Its non-GAAP profit of $1.60 per share was 7.1% above analysts’ consensus estimates.
Is now the time to buy Encompass Health? Find out by accessing our full research report, it’s free.
Encompass Health (EHC) Q1 CY2026 Highlights:
- Revenue: $1.59 billion vs analyst estimates of $1.57 billion (9% year-on-year growth, 1.2% beat)
- Adjusted EPS: $1.60 vs analyst estimates of $1.49 (7.1% beat)
- Adjusted EBITDA: $348.8 million vs analyst estimates of $338.6 million (22% margin, 3% beat)
- The company slightly lifted its revenue guidance for the full year to $6.42 billion at the midpoint from $6.42 billion
- Management slightly raised its full-year Adjusted EPS guidance to $6 at the midpoint
- EBITDA guidance for the full year is $1.37 billion at the midpoint, in line with analyst expectations
- Operating Margin: 19%, in line with the same quarter last year
- Free Cash Flow Margin: 12.2%, down from 15.3% in the same quarter last year
- Same-Store Sales rose 1.6% year on year (4.4% in the same quarter last year)
- Market Capitalization: $10.2 billion
"We are very pleased with our start to 2026 as first quarter revenue increased 9.0% and Adjusted EBITDA grew 11.2%," said Mark Tarr, President and Chief Executive Officer.
Company Overview
With a network of 161 specialized facilities across 37 states and Puerto Rico, Encompass Health (NYSE: EHC) operates inpatient rehabilitation hospitals that help patients recover from strokes, hip fractures, and other debilitating conditions.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Encompass Health’s 6.5% annualized revenue growth over the last five years was mediocre. This was below our standard for the healthcare sector and is a tough starting point for our analysis.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Encompass Health’s annualized revenue growth of 10.6% over the last two years is above its five-year trend, suggesting some bright spots. 
Encompass Health also reports same-store sales, which show how much revenue its established locations generate. Over the last two years, Encompass Health’s same-store sales averaged 4.3% year-on-year growth. Because this number is lower than its revenue growth, we can see the opening of new locations is boosting the company’s top-line performance. 
This quarter, Encompass Health reported year-on-year revenue growth of 9%, and its $1.59 billion of revenue exceeded Wall Street’s estimates by 1.2%.
Looking ahead, sell-side analysts expect revenue to grow 8% over the next 12 months, a slight deceleration versus the last two years. Despite the slowdown, this projection is above average for the sector and indicates the market is baking in some success for its newer products and services.
ONE MORE THING: 3 Hidden Platforms Growing 3X Faster than Amazon, Google, and PayPal. Amazon, Google, and Meta all followed the same playbook: Dominate an ignored market. Build an unbeatable moat. Scale until you’re unstoppable.
These three platforms are running that exact playbook right now. The early investors in Amazon made fortunes. The early investors in these could do the same. Get All 3 Stocks Here for FREE.
Adjusted Operating Margin
Encompass Health has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average adjusted operating margin of 17.5%.
Looking at the trend in its profitability, Encompass Health’s adjusted operating margin rose by 1.4 percentage points over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its recent improvements as the company’s margin has increased by 2.6 percentage points on a two-year basis.
In Q1, Encompass Health generated an adjusted operating margin profit margin of 19.7%, up 1.3 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Encompass Health’s EPS grew at 13.1% compounded annual growth rate over the last five years, higher than its 6.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into the nuances of Encompass Health’s earnings can give us a better understanding of its performance. As we mentioned earlier, Encompass Health’s adjusted operating margin expanded by 1.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.
In Q1, Encompass Health reported adjusted EPS of $1.60, up from $1.37 in the same quarter last year. This print beat analysts’ estimates by 7.1%. Over the next 12 months, Wall Street expects Encompass Health’s full-year EPS of $5.69 to grow 6.4%.
Key Takeaways from Encompass Health’s Q1 Results
It was good to see Encompass Health beat analysts’ EPS expectations this quarter. We were also happy its full-year EPS guidance narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 3.1% to $98.54 immediately after reporting.
Is Encompass Health an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).
