Revenue rose 8.9% and pre-tax income 17.2%, alongside higher volume and price 8-K. Management raised 2026 guidance, with Adjusted EBITDA now $1,395 million to $1,415 million 8-K.
Encompass Health Corp · Q3 2026 · Reported 28 Oct 2026 · US
Key figures
Million USD | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
Revenue | 1,609.50 | 1,477.50 | +8.9 % |
Pre-tax income | 257.80 | 219.90 | +17.2 % |
Net income | 149.90 | 126.50 | +18.5 % |
Diluted EPS | 1.50 USD/share | 1.24 USD/share | +21.0 % |
Pre-tax margin | 16.0 % | 14.9 % | +1.1 pp |
Net margin | 9.3 % | 8.6 % | +0.8 pp |
Figures in USD, as reported. Margins are computed from the reported lines.
Profit grew faster than revenue, alongside higher volume and price
Net operating revenue rose 8.9% to $1,609.5 million in the third quarter, while pre-tax income rose 17.2% to $257.8 million 8-K. The pre-tax margin reached 16.0%, against 14.9% a year earlier 8-K.
Discharges grew 5.7% to 69,605 and net patient revenue per discharge rose 4.0% to $22,543 8-K. Same-store discharge growth was 3.0% 8-K. The gap between total and same-store growth suggests new capacity contributed. Management said it opened four hospitals totaling 189 beds and added 85 beds to existing hospitals in the first nine months 8-K.
Salaries rose less than revenue, while depreciation and lower other income took part of the gain
Salaries and benefits were $840.7 million against $784.8 million a year earlier, while revenue rose $132.0 million 8-K. That suggests labor cost was the main source of the margin gain.
Separately, depreciation and amortization rose to $95.7 million from $82.4 million and interest expense to $32.2 million from $30.8 million 8-K. Other income fell to $1.9 million from $5.9 million 8-K. The depreciation increase is consistent with the new capacity, which is my reading rather than a stated cause.
One-offs barely moved the result, and a lower share count widened the EPS gain
The change in fair market value of marketable securities was a $0.3 million expense in the quarter and a $1.1 million gain a year earlier 8-K. Excluding the item, pre-tax income rose 17.4% against 17.2% reported, with the margin unchanged at 16.0%. Excluding the year-earlier gain, pre-tax income rose 17.8% and the margin gain was 1.2 points against 1.1 points reported 8-K. These are calculations that exclude the item, not company figures.
Net income attributable to Encompass Health rose 18.5% to $149.9 million, and diluted EPS rose 21.0% to $1.50 8-K. Diluted shares fell to 99.7 million from 102.3 million 8-K. Noncontrolling interests took $53.7 million against $48.1 million a year earlier 8-K.
The company-defined measures point the same way. Adjusted EBITDA was $346.6 million, up 15.5%, and adjusted EPS was $1.52 against $1.23 8-K.
Operating cash flow rose, alongside heavier investment and a receivables build
Operating cash flow was $362.0 million in the quarter against $270.8 million a year earlier, up 33.7%, while net income including noncontrolling interests was $203.6 million against $174.6 million 8-K. Company-defined adjusted free cash flow was $263.4 million against $174.2 million 8-K.
Over the nine months, operating cash flow was $957.7 million against $829.6 million 8-K. Purchases of property, equipment and intangible assets rose to $617.2 million from $507.1 million 8-K. The accounts receivable outflow was $89.5 million against $18.8 million 8-K. Long-term debt, net of current portion, was $2,551.3 million at September 30, 2026 against $2,447.2 million at December 31, 2025 8-K.
What to watch next
Management raised full-year guidance: net operating revenue of $6,450 million to $6,500 million (previously $6,410 million to $6,490 million), Adjusted EBITDA of $1,395 million to $1,415 million (previously $1,365 million to $1,395 million), and adjusted EPS of $6.23 to $6.37 (previously $6.02 to $6.25) 8-K.
Whether same-store discharge growth, 3.0% in the quarter, holds as the new beds mature 8-K.
Whether the receivables build seen in the nine months, with accounts receivable at $712.0 million against $619.2 million at December 31, 2025, reverses 8-K.
The report does not give leverage ratio or share repurchase activity.
Sources
Produced by Clarifo Research with the Clarifo financial research engine from the company's public filings. AI was used in parts of the analysis and drafting. Figures are checked automatically against the filings they come from. This is not investment advice.