KeyBanc has reiterated an Overweight recommendation on Encompass Health Corp (NYSE:EHC) and retained a $140.00 price target, noting the stock has declined about 25% since the firm’s third-quarter reporting window. That decline has left Encompass Health trading near what KeyBanc describes as historical trough valuation, roughly 9 times EBITDA, after the S&P 500 held largely flat over the same span.
The investment bank points to two principal drivers behind the recent share-price underperformance. First, KeyBanc is concerned that fourth-quarter same-store volumes could be somewhat muted because of how recently opened de novo facilities are being folded into the same-store base. Second, the firm identified uncertainty around the TEAM value-based care model and how it might affect inpatient rehabilitation facility, or IRF, volumes in 2027.
Given those near-term questions, KeyBanc does not view the company’s forthcoming fourth-quarter report, scheduled for Thursday, as likely to act as a catalyst to reverse the pullback. Still, the firm characterizes the retreat in the stock as overdone and highlights the company’s secular growth profile, labeling Encompass Health a "durable, high-quality secular grower."
Data from InvestingPro referenced by KeyBanc indicates the shares may be undervalued at current levels, and analysts collectively maintain a Strong Buy consensus with price targets spanning $130 to $160. The InvestingPro data and related research are noted as resources that provide additional analyst perspectives and detailed coverage across U.S. equities.
Other developments cited alongside KeyBanc’s view include a positive outlook revision from Moody’s Ratings, which moved Encompass Health’s outlook from stable to positive. Moody’s highlighted robust revenue growth and solid operating performance as supporting factors. The rating agency’s assessment is tied in part to an anticipated improvement in Encompass Health’s EBITDA margin stemming from a 2.6% increase in Medicare reimbursement rates for inpatient rehabilitation facilities in 2026.
UBS has maintained a Buy rating on Encompass Health and kept a $150 price target following the company’s plan to construct a new 50-bed inpatient rehabilitation hospital in Fishers, Indiana. Operational expansion continued with the opening of the Rehabilitation Hospital of Amarillo, a new 50-bed facility in Texas developed with BSA Health System. In governance news, Cain A. Hayes was appointed to the company’s board of directors, bringing healthcare payor experience to the leadership team.
The combination of analyst support, revisions to credit outlook, and ongoing facility growth underpin KeyBanc’s assessment that the recent share-price weakness presents an attractive entry point for investors who prioritize long-term secular growth and margin improvement prospects.
Note: The company’s upcoming earnings release is mentioned as unlikely to be an immediate stock catalyst according to KeyBanc.