Encompass Health Corporation (NYSE: EHC) reported its financial results for the fourth quarter and full year ended December 31, 2025, posting higher revenue, earnings and cash flow, and provided guidance for 2026, the company said in its earnings release.
Fourth-quarter performance
For the fourth quarter, net operating revenue rose 9.9% year on year to $1.54 billion, compared with $1.41 billion a year earlier. The increase reflected higher discharges and improved net patient revenue per discharge. Discharges increased to 67,238, up 5.3%, while net patient revenue per discharge rose 4.1% to $22,273.
Income from continuing operations attributable to Encompass Health on a diluted basis increased to $1.42 per share, from $1.18 per share in the prior-year quarter. Adjusted earnings per share rose to $1.46, compared with $1.17 a year earlier.
Operating cash flow for the quarter increased to $346.0 million, up from $278.8 million in Q4 2024. Adjusted EBITDA rose 15.9% to $335.6 million, while adjusted free cash flow increased 23.6% to $235.4 million.
Full-year 2025 results
For the full year, Encompass Health reported net operating revenue of $5.94 billion, compared with $5.37 billion in 2024. Net income attributable to Encompass Health increased to $566.2 million, up from $455.7 million a year earlier.
Diluted earnings per share from continuing operations for 2025 were $5.55, compared with $4.49 in 2024. On an adjusted basis, diluted EPS for the year was $5.45.
Adjusted EBITDA for the year increased to $1.27 billion, from $1.10 billion in 2024. Adjusted free cash flow for 2025 was $817.9 million, compared with $690.3 million in the prior year. The company said operating cash flow for the full year rose to $1.18 billion.
Capacity expansion and operations
During 2025, Encompass Health added 517 inpatient rehabilitation beds through the opening of eight new hospitals and the expansion of existing facilities. The company ended the year with 173 hospitals across 39 states and Puerto Rico. Management said capacity expansion supported higher discharge volumes and revenue growth.
Operating expenses increased in line with volume growth and wage pressures. Salaries and benefits rose year on year, reflecting staffing needs and inflationary costs. Depreciation and amortization also increased, reflecting continued investment in hospital infrastructure.
Balance sheet and cash flow
As of December 31, 2025, total assets stood at $7.09 billion, compared with $6.53 billion a year earlier. Long-term debt, net of the current portion, was $2.45 billion. Cash and cash equivalents were $72.2 million, with total cash, cash equivalents and restricted cash of $102.9 million.
Capital expenditure for the year totaled $736.4 million, primarily related to new hospitals and bed expansions. The company also returned capital to shareholders through dividends and share repurchases during the year.
Outlook – 2026
Encompass Health issued guidance for 2026. The company expects net operating revenue of $6.37 billion to $6.47 billion. Adjusted EBITDA is projected at $1.34 billion to $1.38 billion. Adjusted earnings per share from continuing operations are expected in the range of $5.81 to $6.10.
The company said demand for inpatient rehabilitation services is supported by demographic trends, including an aging U.S. population. Management added that it will continue to invest in capacity and clinical programs to support growth.
Summary
Encompass Health reported stronger revenue, earnings and cash flow in the fourth quarter and full year 2025, supported by higher patient volumes and pricing. The company expanded capacity during the year and issued guidance pointing to continued growth in 2026, reflecting expectations of sustained demand for inpatient rehabilitation services.