We have reiterated our Neutral recommendation on
Gentiva Health Services Inc.
) based on rising expenses, Medicare rate cut and legal hassles,
which are expected to weigh on the positives. This home health
and hospice company carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Gentiva's fourth quarter 2012
remained unchanged at 35 cents per share over the past 60 days,
due to the lack of any estimate revision. This reflects a decline
of 6.7% from the year-ago quarter.
Meanwhile, over the past 60 days, the 2012 estimate remained
unchanged as well. Consequently, the Zacks Consensus Estimate for
2012 stands at $1.29 per share, down 19.6% over 2011. This
estimate lies within Gentiva's guidance of $1.20-$1.30 per
Gentiva raised its 2012 earnings guidance from $1.00-$1.20 per
share during the third-quarter earnings release on Nov 1, 2012.
The company reported third-quarter 2012 operating earnings of 32
cents per share, which modestly beat the Zacks Consensus Estimate
of 29 cents as well as the year-ago quarter level of 27 cents per
The rising expenses of Gentiva are resulting in slower
bottom-line growth and weak operating cash flow. Moreover, the
changes proposed by the Centers for Medicare & Medicaid
Services (CMS) in Jul 2012 are expected to reduce Medicare
reimbursements by 0.1% in 2013.This will likely reduce the
company's earnings, which are significantly reliant on Medicare
earnings. Further, Gentiva is facing substantial legal trouble
over Medicare reimbursements.
However, these negatives are mitigated by various positives.
Gentiva's ability to post robust earnings has been consistent
over the years, which has led to a sustained increase in net
revenue. Moreover, the company's strategic acquisitions are
expanding its market share, while its focus on specialty services
Other Stocks to Consider
While we maintain a cautious stance on Gentiva, other home
health companies such as
Addus HomeCare Corporation
) and hospice companies such as
) are worth considering. Both these stocks carry a Zacks Rank #2
ADDUS HOMECARE (ADUS): Free Stock Analysis
GENTIVA HEALTH (GTIV): Free Stock Analysis
HEALTHSOUTH CP (HLS): Free Stock Analysis
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