Gentiva Health Services, Inc.
) reported third-quarter 2013 adjusted earnings of 15 cents per
share, which missed the Zacks Consensus Estimate of 22 cents and
declined from the year-ago earnings of 32 cents per share.
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Including cost savings, restructuring, legal settlement and
acquisition and integration costs, Gentiva posted net income of
12 cents per share, rebounding from a loss of 2 cents per share
in the third quarter of 2012. Improvement in the home health
business, increase in Medicare admissions and expense management
initiatives mainly led to the upside.
Gentiva's net revenues declined 3.3% year over year to $410.5
million. Net revenues also missed the Zacks Consensus Estimate of
$414 million. The year-over-year decline was largely due to a cut
in home health Medicare rates along with the impact of the
sequestration rate cut on Medicare-based revenues and the sale
and closure of some branches in 2012.
Home Health Episodic segment revenues remained flat at $206.9
million. Despite soft hospital and physician volumes , results in
this segment were consistent with the last few quarters.
Additionally, expense management activities undertaken by this
group are expected to help the company improve the operational
efficiency of this segment.
Meanwhile, Hospice segment revenues declined 7.5% year over year
to $175.6 million. This segment has been struggling with
volumes. Industry headwinds like the new regulatory requirements
and negative publicity in the hospice benefit segment are
adversely affecting the growth rate of this segment and hence are
a matter of concern for the company.
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) attributable to continuing operations
decreased 23.4% year over year to $35.3 million.
Gentiva exited the reported quarter with cash and cash
equivalents of approximately $183.3 million, down from $185.1
million as of Jun 30, 2013. Outstanding debt was $910.2 million,
unchanged from Jun 30, 2013.
During the reported quarter, net cash from operating activities
amounted to $8.4 million, lower than $25.5 million in the
prior-year period. Free cash flow also declined to $1.7 million
from $23.2 million in the third quarter of 2012.
As of Sep 30, 2013, Gentiva had total assets of $1.25 billion and
shareholder equity of $46.9 million, as compared with $1.51
billion and $234.7 million, respectively, as of Dec 31, 2012.
Gentiva's net revenue guidance for 2013 was upped to $1.72
billion - $1.74 billion from $1.67-$1.70 billion guided earlier.
The company increased its guidance range based on the expected
impact of the proposed 2014 Medicare home health and hospice
reimbursement rules on fourth-quarter results and the Harden
acquisition. The current Zacks Consensus Estimate is $1.7
billion, lower than the guided range. Gentiva expects adjusted
income attributable to Gentiva shareholders between 90 cents and
$1.00 per share, compared to the previous guided range of 90
cents to $1.10 per share. The current Zacks Consensus Estimate of
92 cents per share lies within the guided range.
Gentiva's third quarter earnings missed our earnings estimates
and declined from the year-ago period as well. The top line also
suffered the same fate. However, increased revenue guidance on
account of the Harden acquisition and the effect of certain rules
related to the U.S. healthcare reform that are awaiting
implementation in 2014 reflect the company's effort to overcome
During the quarter, Gentiva formed a joint venture (JV) with Wake
Forest Baptist Medical Center, the Winston-Salem based fully
integrated medical center that conducts medical education and
research, a clinical enterprise and promotes the
commercialization of research discoveries. Gentiva also completed
the acquisition of Harden Healthcare Holdings Inc. The
acquisition should enhance Gentiva's Medicare exposure and
enhance the long-term growth of the company.
Owing to the increasing healthcare needs of the aging population
and the existing rate pressures, the healthcare industry provides
ample growth opportunities at present. The Harden acquisition and
the Wake Forest Baptist JV should allow Gentiva to capitalize on
these opportunities. Also, Gentiva's portfolio should expand as
it will be in a position to offer its services to the dual
eligibles. Additionally, the corporate restructuring initiative
should help the company strengthen its operations by bringing its
home health, hospice and community care businesses under a common
regional management and thus help satisfy the demands of an
emerging pre- and post-acute care healthcare market.
) third-quarter 2013 earnings per share of 53 cents were up 10%
year over year, marking the company's second consecutive quarter
of double-digit growth. Earnings, which were in line with the
Zacks Consensus Estimate, also touched the upper end of the
company's guidance range of 51−53 cents.
Gentiva carries a Zacks Rank #3 (Hold). Some health service
providers worth considering are
US Physical Therapy Inc.
) - both carrying a Zacks Rank #2 (Buy).