Shares of Encompass Health Corporation (EHC) experienced a sharp 8.66% decline in after-hours trading on Wednesday, despite the company reporting better-than-expected third-quarter results and raising its full-year guidance. This unexpected drop has left investors puzzled, given the seemingly positive news.

Encompass Health reported Q3 adjusted earnings of $1.23 per share, surpassing analyst expectations of $1.20. The company's net operating revenue grew by 9.4% year-over-year to $1.48 billion, also beating estimates. In light of these strong results, Encompass Health raised its full-year 2025 guidance. The company now expects net operating revenue between $5.905 billion and $5.955 billion, and adjusted EPS in the range of $5.22 to $5.37.

The stark contrast between the positive financial results and the stock's after-hours plunge suggests that investors may have had even higher expectations or are concerned about other factors. Possible explanations for the sell-off could include profit-taking following recent gains, concerns about the sustainability of growth in the healthcare facilities sector, or worries about potential headwinds in the coming quarters. It's worth noting that prior to this drop, Wall Street had a generally positive outlook on Encompass Health, with a median 12-month price target of $137.50, about 8.2% above its previous closing price. As the market digests this information, investors will be closely watching for any additional insights or analyst revisions that might shed light on this puzzling stock movement.