Wrapping up Q2 earnings, we look at the numbers and key takeaways for the outpatient & specialty care stocks, including Select Medical (NYSE:SEM) and its peers.
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 4.9% since the latest earnings results.
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 print was in line with analysts’ expectations, and overall, it was a strong quarter for the company with a solid beat of analysts’ full-year EPS guidance estimates and an impressive beat of analysts’ EPS estimates.
Select Medical delivered the weakest full-year guidance update of the whole group. Unsurprisingly, the stock is down 18.8% since reporting and currently trades at $12.03.
Is now the time to buy Select Medical? 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 a solid beat of analysts’ sales volume estimates and an impressive beat of analysts’ EPS estimates.
U.S. Physical Therapy achieved the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 19.9% since reporting. It currently trades at $87.68.
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 53.1% since the results and currently trades at $0.85.
Read our full analysis of agilon health’s results here.
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 number surpassed analysts’ expectations by 2.2%. Overall, it was a very strong quarter as it also logged an impressive beat of analysts’ full-year EPS guidance estimates and an impressive beat of analysts’ EPS estimates.
Encompass Health delivered the biggest analyst estimates beat and highest full-year guidance raise among its peers. The stock is up 7.7% since reporting and currently trades at $117.58.
Read our full, actionable report on Encompass Health here, it’s free.
LifeStance Health Group (NASDAQ:LFST)
With over 6,600 licensed mental health professionals treating more than 880,000 patients annually, LifeStance Health (NASDAQ:LFST) provides outpatient mental health services through a network of clinicians offering psychiatric evaluations, psychological testing, and therapy across 33 states.
LifeStance Health Group reported revenues of $345.3 million, up 10.6% year on year. This result was in line with analysts’ expectations. Aside from that, it was a mixed quarter as it also logged full-year EBITDA guidance topping analysts’ expectations but a slight miss of analysts’ EPS estimates.
The stock is up 11.4% since reporting and currently trades at $4.35.
Read our full, actionable report on LifeStance Health Group here, it’s free.
Market Update
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
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