The Pennant Group (PNTG) delivered a quarter with two very different halves. Earnings Whispers recorded EPS of $0.28, exactly matching consensus, and earnings fell 9.7% from a year ago. Revenue was $302.25 million, up 32.0% and 2.8% above the $294.0 million consensus. The company's own figures look better. GAAP diluted EPS was $0.26 versus $0.17, and adjusted diluted EPS was $0.35 versus $0.30, a 16.7% gain. That conflict between measures is worth noting, but it is not the central story. The real development is that home health and hospice continue to accelerate while senior living, benefits costs and management's guidance language all moved the wrong way.
The top line was driven largely by the UnitedHealth/Amedisys Southeast assets acquired on October 1, 2025. Home health and hospice segment revenue jumped 38.2% to $239.8 million, and segment adjusted EBITDA rose 42.0% to $38.1 million. Consolidated adjusted EBITDA climbed 42.4% to $24.7 million. Below the operating line, the picture is less tidy. Net interest expense rose to $3.6 million from $1.0 million as debt funded the expansion. Net leverage reached 1.95x versus 1.7x at the end of 2025. The adjusted figures also exclude $1.55 million of UnitedHealth transition-services costs and $3.4 million of share-based compensation. That helps explain why adjusted EBITDA grew far faster than per-share earnings, and why investors should look beyond the headline EBITDA growth when judging the quality of the quarter.
The underlying home health and hospice engine is getting stronger, not merely bigger. Same-agency segment revenue grew 10.5%. Same-store home health admissions rose 8% and same-store Medicare admissions 12%, versus 5.8% and 9.2% in the first quarter. Same-store hospice average daily census grew 13%, up from 10.2% earlier in the year. Segment EBITDA margin improved to roughly 15.9% from about 14.7% in the first quarter. Same-store margin expanded about 80 basis points despite higher benefits costs. The one blemish was home health Medicare revenue per episode, which fell 2.2% on lower Southeast wage-index rates.
Senior living is where the quarter cracked. Segment revenue rose 12.6% to $62.4 million, but segment adjusted EBITDA grew only 3% to $5.7 million. That compares with 30.6% growth in the first quarter, and segment margin compressed to roughly 9.1% from 11.8%. Total occupancy fell 250 basis points to 78.4%, and same-store occupancy slipped 60 basis points to 81.2%. That reverses the 180-basis-point gain reported in the first quarter. Management attributed the weakness to two markets where acquisitions outpaced leadership capacity. It also warned that results may stay lumpy during its nine-quarter optimization window for distressed acquisitions, even as it kept buying, including River Center in Tucson and the MainPlace real estate in Orange, California. Separately, organization-wide self-funded benefits costs ran about 50 basis points of revenue above expectations, and management expects a similar hit in the fourth quarter.
The catalysts are real. The Southeast EMR transition finished October 31, and management described the integration as ahead of initial expectations. The CY2027 home health final rule delivered a 2.1% net increase, about 1.5% on Pennant's claims. That is a meaningful relief from the 6.4% cut proposed earlier. Managed-care contracting in the Southeast offers additional upside. Management reaffirmed full-year guidance for revenue of $1.13-$1.17 billion, adjusted EBITDA of $88.5-$94.1 million and adjusted EPS of $1.26-$1.36. However, its language shifted from pointing investors to the upper end in the first quarter to simply being on pace. It also flagged possible modest fourth-quarter disruption from the Southeast transition. Bears have legitimate ammunition in that softer framing.
Investor sentiment reflected the shift, falling from 0.21 to roughly neutral at -0.02. That is a notable cooling rather than a collapse. The stock has run 16.4% since the open after the August report to $44.04, about 23.7% above its 200-day moving average. Expectations had therefore risen into a print that only matched estimates. The Earnings Whispers trend readings remain mostly positive, with sequential growth, momentum and AVWAP all favorable.
The bottom line is that Pennant's core home health and hospice franchise is accelerating, and the reimbursement backdrop improved materially. Senior living execution, rising benefits costs, higher leverage and a less confident guidance tone have tempered the story. With shares well extended above their long-term average and sentiment fading, the setup now depends on proving that the senior living stumble is temporary rather than a symptom of growing too fast.