Gentiva Maintained at Neutral - Analyst Blog
April 12 2012 - 7:45AM
Zacks
We are maintaining our ‘Neutral’ recommendation on
Gentiva Health Services Inc. (GTIV) as its strong
market position, divestiture of low-margin business and growth from
specialty programs are offset by a decline in cash balance as well
as shareholders’ equity. Ratings downgrade and legal issues are the
other downsides.
Gentiva reported fourth-quarter 2011 operating earnings of $11.3
million or 37 cents per share, surpassing the Zacks Consensus
Estimate of 31 cents. However, the income compared unfavorably with
$20.9 million or 69 cents earned in the year-ago quarter.
Gentiva is a leading national provider of comprehensive home
health services and competes with organizations like
Amedisys Inc. (AMED) and Lincare Holdings
Inc. (LNCR). The company’s earning ability has remained
strong over the years, supported by regular growth in net revenues.
With the exception of 2009, which was negatively affected by the
divestiture of the CareCentrix business, the company’s revenues
have been rising steadily since 2006.
Moreover, the Hospice segment of Gentiva has been generating
strong growth since the acquisition of Odyssey in August 2010. The
acquisition has made Gentiva one of the leading hospice care
providers in the U.S.
However, the rising expenses of Gentiva are negating the
increase in revenues, leading to a reduced bottom-line growth. The
company’s corporate, interest and selling, general and
administrative expenses have been increasing since 2009.
Consequently, the operating income for 2011 showed a 41% decline
from 2010, while the company reported a net loss in 2011.
Moreover, rising expenses have weakened Gentiva’s operating cash
flows over the past few years, although the company still has a
substantial cash balance. Further, the amendment of the senior
secured credit agreement in March 2012 increased the interest rate
on term loans, thereby substantially amplifying the company’s
interest expenses.
The interest rate hike has also resulted in a substantial
decline in the earnings outlook for 2012. With considerable capital
expenditure required every quarter, Gentiva needs to check its cash
outflows.
The Zacks Consensus Estimate of earnings for Gentiva for the
first quarter of 2012 is currently 27 cents per share, down by an
estimated 48% year over year. For 2012, earnings are expected to be
$1.11 per share, showing a projected decline of roughly 31% over
2011.
Gentiva currently carries a Zacks #3 Rank, implying a short-term
‘Hold’ rating.
AMEDISYS INC (AMED): Free Stock Analysis Report
GENTIVA HEALTH (GTIV): Free Stock Analysis Report
LINCARE HLDGS (LNCR): Free Stock Analysis Report
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