PACS Group, Inc. (PACS) Earnings & Analysis

Latest quarter

PACS reported Q2 FY2026 revenue of $1.4 billion, above the consensus by 1.07%, although both reported revenue and the estimate rounded to $1.4 billion. Adjusted earnings per share were $0.63, above the $0.55 consensus estimate. Diluted earnings per share rose to $0.47 from $0.31 a year earlier.

The company’s filing attributes growth in skilled nursing revenue to more patient days, as operational bed count and occupancy increased. Same-store skilled nursing revenue grew 5.8%, while same-store occupancy rose to 90.6% from 89.1%. The filing also says average Medicaid rates increased 3.1%, reflecting state reimbursement increases and participation in supplemental payment and quality programs.

PACS reported a gross margin of 17.1%, compared with 14.8% a year earlier, and an operating margin of 7.66%, compared with 6.15%. The filing says cost of services increased as salaries and wages and facility administrative expenses rose. Free cash flow was $109.0 million, compared with $34.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Jason Murray said the existing portfolio drove the quarter’s performance as occupancy and patient mix improved. CFO Carey Hendrickson said same-store skilled nursing revenue rose 5.8% to $1.35 billion, while occupancy rose to 90.6% from 89.1%. She attributed the increase in adjusted EBITDA margin to occupancy, patient mix and cost management.

Murray said PACS gives facility leaders local decision-making authority while regional teams and PACS Services provide clinical, technology and administrative support. He said facilities acquired in the 2024 expansion were progressing through integration, with teams focused on leadership, operating systems and community relationships.

Asked about quality and competition for payer contracts, Murray said many payers set quality thresholds for providers to participate in their plans. He said quality and density in local markets help PACS negotiate contracts. Murray also described a California facility that graduated from the Special Focus Facility program on June 29, 2026, after its local team strengthened systems and processes with support from PACS Services and regulators.

On investment, Hendrickson said PACS spent $190.8 million on real estate in the first half of 2026. Murray said PACS had closed on the operations of 20 Texas facilities in its agreement to acquire 34 facilities from Eduro Healthcare and expected the remaining facilities to close in the third and fourth quarters.

In questions about the acquisition, Hendrickson said the Texas facilities would contribute more revenue than EBITDA to guidance while integration takes place. She also said PACS expected Ohio supplemental payments in the second half but could not quantify them or their timing; the payments were excluded from guidance. Hendrickson said PACS expected to remediate its previously disclosed material weaknesses in internal control by year-end. Murray said the company could not estimate when its government investigations would be resolved.

Guidance

PACS raised its FY2026 revenue guidance to $5.75 billion to $5.85 billion from $5.65 billion to $5.75 billion. Hendrickson said the company also raised its adjusted EBITDA guidance to $640 million to $660 million from $605 million to $625 million.

Hendrickson said the outlook includes a modest contribution from the 20 Texas facilities acquired on August 1 but excludes the remaining pending Eduro facilities.