What Happened?
Shares of healthcare services company Select Medical (NYSE: SEM) fell 6.8% in the morning session after it reported mixed fourth-quarter 2025 results and issued a disappointing earnings outlook for 2026.
While the company's revenue grew 6.4% year-over-year to $1.40 billion, beating Wall Street's expectations, its profitability fell significantly short. Select Medical posted earnings of $0.16 per share, missing the analyst consensus estimate of $0.24 by a wide margin. The company's adjusted EBITDA, a key measure of operational profitability, also came in 19.2% below expectations.
Looking ahead, the company's full-year earnings guidance of $1.27 per share at the midpoint also missed forecasts, signaling to investors that profitability challenges may continue.
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What Is The Market Telling Us
Select Medical’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 22.1% on the news that the company reported disappointing first-quarter 2025 results, with both revenue and earnings per share falling short of Wall Street's expectations.
Margins declined across two of the three segments: adjusted EBITDA fell significantly in the critical illness recovery unit and slipped slightly in outpatient rehab. This margin pressure, especially in the largest business line, partly explained why adjusted EPS failed to meet expectations. On the other hand, Select Medical beat analysts' full-year EPS guidance expectations. Still, this quarter could have been better.
Select Medical is up 2.2% since the beginning of the year, but at $15.14 per share, it is still trading 21% below its 52-week high of $19.17 from February 2025. Investors who bought $1,000 worth of Select Medical’s shares 5 years ago would now be looking at an investment worth $552.55.
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