Let’s dig into the relative performance of Encompass Health (NYSE: EHC) and its peers as we unravel the now-completed Q2 outpatient & specialty care earnings season.

The outpatient and specialty care industry delivers targeted medical services in non-hospital settings that are often cost-effective compared to inpatient alternatives. This means that they are more desired as rising healthcare costs and ways to combat them become more and more top-of-mind. Outpatient and specialty care providers boast revenue streams that are stable due to the recurring nature of treatment for chronic conditions and long-term patient relationships. However, their reliance on government reimbursement programs like Medicare means stroke-of-the-pen risk. Additionally, scaling a network of facilities can be capital-intensive with uneven return profiles amid competition from integrated healthcare systems. Looking ahead, the industry is positioned to grow as demand for outpatient services expands, driven by aging populations, a rising prevalence of chronic diseases, and a shift toward value-based care models. Tailwinds include advancements in medical technology that support more complex procedures in outpatient settings and the increasing focus on preventive care, which can be aided by data and AI. However, headwinds such as reimbursement rate cuts, labor shortages, and the financial strain of digitization may temper growth.

The 7 outpatient & specialty care stocks we track reported a satisfactory Q2. As a group, revenues along with next quarter’s revenue guidance were in line with analysts’ consensus estimates.

While some outpatient & specialty care stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.5% since the latest earnings results.

Encompass Health (NYSE: EHC)

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.

Encompass Health reported revenues of $1.46 billion, up 12% year on year. This print exceeded analysts’ expectations by 2.2%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ full-year EPS guidance estimates and a beat of analysts’ EPS estimates.

"During the quarter, we further increased our capacity to serve patients in need of inpatient rehabilitation care, opening a new 60-bed hospital in Fort Myers, Florida, and adding 26 beds to an existing hospital," said President and Chief Executive Officer Mark Tarr.

Encompass Health pulled off the biggest analyst estimates beat and highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 8.6% since reporting and currently trades at $118.63.

Is now the time to buy Encompass Health? Access our full analysis of the earnings results here, it’s free.

Best Q2: U.S. Physical Therapy (NYSE: USPH)

With a nationwide footprint spanning 671 clinics across 42 states, U.S. Physical Therapy (NYSE: USPH) operates a network of outpatient physical therapy clinics and provides industrial injury prevention services to employers across the United States.

U.S. Physical Therapy reported revenues of $197.3 million, up 18% year on year, outperforming analysts’ expectations by 2.1%. The business had a very strong quarter with an impressive beat of analysts’ sales volume estimates and a beat of analysts’ EPS estimates.

U.S. Physical Therapy delivered the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 19.7% since reporting. It currently trades at $87.49.

Is now the time to buy U.S. Physical Therapy? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: agilon health (NYSE: AGL)

Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE: AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.

agilon health reported revenues of $1.39 billion, down 5.9% year on year, falling short of analysts’ expectations by 4.8%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates and customer base in line with analysts’ estimates.

agilon health delivered the weakest performance against analyst estimates and slowest revenue growth in the group. The company added 7,000 customers to reach a total of 498,000. As expected, the stock is down 50.3% since the results and currently trades at $0.90.

Read our full analysis of agilon health’s results here.

Surgery Partners (NASDAQ: SGRY)

With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.

Surgery Partners reported revenues of $826.2 million, up 8.4% year on year. This print beat analysts’ expectations by 1.2%. It was a strong quarter as it also produced a beat of analysts’ EPS estimates and a narrow beat of analysts’ sales volume estimates.

The stock is up 1.3% since reporting and currently trades at $22.51.

Read our full, actionable report on Surgery Partners here, it’s free.

Select Medical (NYSE: SEM)

With a nationwide network spanning 46 states and over 2,700 healthcare facilities, Select Medical (NYSE: SEM) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States.

Select Medical reported revenues of $1.34 billion, up 4.5% year on year. This number met analysts’ expectations. Overall, it was a strong quarter as it also put up an impressive beat of analysts’ full-year EPS guidance estimates and a beat of analysts’ EPS estimates.

Select Medical had the weakest full-year guidance update among its peers. The stock is down 17.6% since reporting and currently trades at $12.20.

Read our full, actionable report on Select Medical here, it’s free.

Market Update

In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.

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