What happens to stocks if AI loses momentum?
On Monday, Encompass Health Corp (NYSE:EHC), a healthcare provider with an $11.45 billion market capitalization, received a revised price target from RBC Capital Markets, with analysts at the firm boosting their outlook from $110.00 to $125.00. The company’s stock continues to hold an Outperform rating, following a robust performance in the first quarter of 2025 that exceeded market expectations. According to InvestingPro data, the stock has surged nearly 18% in the past week, trading near its 52-week high of $114.38.
Encompass Health’s recent financial results revealed a significant shift in its payer mix, with Medicare Fee-For-Service (FFS) volumes surpassing Medicare Advantage (MA) for the first time in three years. This development marks a potential positive change for the company, although management has not yet confirmed if this will become a consistent trend. The company’s strong operational execution is reflected in its impressive 11.21% revenue growth over the last twelve months.
The improvement in payer mix, combined with the strong start of the year, prompted Encompass Health to raise its guidance. RBC Capital’s analysts have reiterated their positive stance on the stock, aligning with the company’s upward momentum. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with four analysts recently revising their earnings estimates upward for the upcoming period. For deeper insights into EHC’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The RBC Capital analyst noted the importance of the first quarter’s developments, stating, "EHC posted a strong start to 2025 with first quarter results well ahead of expectations and a commensurate guidance raise." The analyst also mentioned the potential benefits of the observed shift in payer mix, adding, "While management is not calling a trend on one-quarter’s mix, the shift could represent upside to guidance should it persist."
In response to these factors, RBC Capital has adjusted their price target, indicating confidence in Encompass Health’s performance and future prospects. The new target reflects RBC Capital’s assessment of the company’s value and its anticipated trajectory in the healthcare market.
In other recent news, Encompass Health Corp reported impressive financial results for the first quarter of 2025, surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $1.37, exceeding the projected $1.20, and reported revenues of $1.46 billion, which was above the anticipated $1.43 billion. This performance represents a 10.6% year-over-year increase in revenue. Encompass Health also raised its full-year guidance, now forecasting net operating revenue between $5.85 billion and $5.925 billion, with adjusted EPS projected between $4.85 and $5.10. Additionally, the company plans strategic expansions, including new hospitals and bed additions, to meet growing demand. Analyst firms have not provided any recent upgrades or downgrades, but the financial results indicate strong operational efficiency. Encompass Health’s leadership highlighted consistent demand for their services and strong partnerships with acute care hospitals.
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