Raymond James has maintained a Strong Buy recommendation and a $130.00 price target on Encompass Health Corp (NYSE:EHC) following the company’s fourth-quarter 2025 financial report, which exceeded market expectations on several fronts.
Encompass reported adjusted EBITDA of $336.0 million for Q4 2025, above the analyst consensus of $313.2 million. The company said the quarter benefited from a small increase in supplemental payments year-over-year of roughly $600,000, a timing benefit from $3 million of supply expenses that were shifted into Q3, and about $6 million of lower-than-expected startup losses. Those positives were partially offset by $4 million in higher support costs tied to the Oracle Fusion rollout.
For 2026 the company issued initial guidance for adjusted EBITDA in a range of $1,340 million to $1,380 million. That range is in line with the Street expectation of $1,352 million that was in place before the earnings announcement. Raymond James described the guidance as "conservative as usual," noting the midpoint of the range implies roughly 1% organic growth compared with the fourth-quarter run rate.
The market responded well to the results, pushing the stock up about 6% on Friday. Raymond James observed that consensus expectations had been relatively muted heading into the release amid concerns about tougher year-over-year comparisons, the impact of the CMS TEAM model, and possible share losses. Company management disclosed that the CMS TEAM model currently covers approximately 2% of their volumes, a figure Raymond James said sits at the low end of their previously estimated exposure.
Raymond James reiterated its preference for Encompass Health on the basis of what the firm described as "best in class operations and consistency," along with secular growth drivers that include both organic demand expansion and inorganic capacity additions. Encompass plans to add about 5% of total capacity in 2026, an element Raymond James highlighted as supportive of the company’s longer-term growth picture.
Additional details from the quarter underscore the company’s performance: reported earnings per share came in at $1.46, ahead of the expected $1.30, representing a 12.31% surprise. Revenue for the quarter was $1.54 billion, which matched projections. These results demonstrated better-than-forecast operating execution for the period and contributed to the positive market reaction.
Analysts following the company have interpreted the beat and the guidance as constructive, though no specific analyst rating changes were noted in the company’s reporting. Investors will likely monitor the evolution of TEAM model exposure, the pace of capacity additions, and the ongoing costs associated with systems implementations as the company progresses through 2026.
Contextual summary
- Q4 2025 adjusted EBITDA: $336.0 million versus consensus $313.2 million.
- 2026 adjusted EBITDA guidance: $1,340-1,380 million; Street expectation before release: $1,352 million.
- Q4 EPS: $1.46 versus expected $1.30 (12.31% surprise); revenue: $1.54 billion, in line with projections.