EHC Short Interest Spikes Before Today's Earnings Report

Encompass Health reports third-quarter results tonight, with the inpatient rehabilitation operator carrying a notable jump in short interest into the print and a put/call ratio that has run well above its recent average for the past week.

Short sellers added positions sharply in the final days before the release. Short interest climbed 19% in a single session on October 26 to reach 3.3% of the free float, extending a weekly gain of 18%. That one-week move is roughly 1.7 standard deviations above the company's typical weekly shift over the past year, making it an unusual burst of bearish positioning rather than routine drift. The ORTEX short score ticked up to 35.7, its highest reading in the recent window, though it remains in middling territory on a broader universe basis. The borrow market itself offers no friction: availability is extremely loose at nearly 5,900%, with more than 81 million shares available to lend against the 3.3 million currently borrowed, and borrowing costs are negligible at 0.36% annualised.

Options positioning reinforces the cautious lean. The put/call ratio has held above 3.0 for several consecutive sessions, roughly three times the 20-day average of 1.07 and around 1.6 standard deviations above it. This pattern followed a sharp reversal from the call-dominated profile that prevailed through mid-October, when the PCR sat consistently below 0.28. The previous ORTEX earnings preview four days ago noted the same directional shift; it has not abated since. The stock itself is down about 2% over the past month at $121.53, and has lagged peers over the past week, with ENSG, PNTG and ADUS all posting gains of 2% to 5% over the same period.

The analyst community is constructive but the most recent target revisions date to August, following the second-quarter beat. At that point, several firms including UBS and Truist raised targets into the $150 range after the company lifted full-year EBITDA guidance by $15 million. The mean target at $148 implies roughly 22% upside from current levels. The bull case centres on the structural undersupply of inpatient rehabilitation beds and Encompass Health's scale, low leverage of 1.9 times, and ongoing bed expansion programme. The bear case points to staffing cost pressure, MedPAC's repeated recommendation of a 7% IRF Medicare rate cut (estimated to reduce EBITDA by around 18%), and Medicare Advantage plans tightening admissions criteria. Those two competing narratives have been live for several quarters; tonight's figures on same-store volume growth, staffing costs and EBITDA margin will determine how much ground either side has gained.

The print will therefore test whether the August momentum, a 13% single-day gain after the prior quarter's beat, has carried through operationally, or whether the reimbursement and cost headwinds that have shadowed the sector have begun to bite.