Health care services provider Encompass Health (NYSE: EHC) announced better-than-expected revenue in Q2 CY2026, with sales up 9.6% year on year to $1.60 billion. The company expects the full year’s revenue to be around $6.45 billion, close to analysts’ estimates. Its non-GAAP profit of $1.55 per share was 4.7% above analysts’ consensus estimates.
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Encompass Health (EHC) Q2 CY2026 Highlights:
- Revenue: $1.60 billion vs analyst estimates of $1.57 billion (9.6% year-on-year growth, 1.8% beat)
- Adjusted EPS: $1.55 vs analyst estimates of $1.48 (4.7% beat)
- Adjusted EBITDA: $348 million vs analyst estimates of $340.4 million (21.8% margin, 2.2% beat)
- The company slightly lifted its revenue guidance for the full year to $6.45 billion at the midpoint from $6.42 billion
- Management raised its full-year Adjusted EPS guidance to $6.14 at the midpoint, a 2.2% increase
- EBITDA guidance for the full year is $1.38 billion at the midpoint, in line with analyst expectations
- Free Cash Flow Margin: 11.1%, down from 12.8% in the same quarter last year
- Same-Store Sales rose 2.8% year on year (4.7% in the same quarter last year)
- Market Capitalization: $10.96 billion
"We are very pleased with our performance for the second quarter, as revenue increased 9.6% and Adjusted EBITDA grew 9.2%," 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
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Encompass Health’s 7.4% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the healthcare sector and is a poor baseline 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. 
We can dig further into the company’s revenue dynamics by analyzing its 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% 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 9.6%, and its $1.60 billion of revenue exceeded Wall Street’s estimates by 1.8%.
Looking ahead, sell-side analysts expect revenue to grow 7.7% 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 implies the market is forecasting some success for its newer products and services.
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Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Encompass Health has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average operating margin of 17.5%.
Looking at the trend in its profitability, Encompass Health’s operating margin rose by 3 percentage points over the last five years, as its sales growth gave it operating leverage. The company’s two-year trajectory shows its performance was mostly driven by its recent improvements.
in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Encompass Health’s solid 8.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.
In Q2, Encompass Health reported adjusted EPS of $1.55, up from $1.40 in the same quarter last year. This print beat analysts’ estimates by 4.7%. Over the next 12 months, Wall Street expects Encompass Health’s full-year EPS to grow 7.3% from $5.84 to $6.26.
Key Takeaways from Encompass Health’s Q2 Results
It was encouraging to see Encompass Health beat analysts’ full-year EPS guidance expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 7.6% to $119.19 immediately after reporting.
Encompass Health may have had a good quarter, but does that mean you should invest right now? 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).
