We issued an updated research report on
Gentiva Healthcare Services Inc.
). Gentiva has been witnessing weak revenues over the last few
years, the main reason being the sale and disposal of operations
along with rate cuts. Although 2013 saw a slight improvement, it
was far from being impressive.
Earlier this month, Gentiva reported fourth-quarter 2013 earnings
that lagged the Zacks Consensus Estimate as well as declined year
over year. The top line also missed our expectations although it
improved year over year.
With respect to earnings trend, this Zacks Rank #5 (Underperform)
healthcare services company delivered negative surprises in three
out of the last four quarters, with an average negative surprise
of 47.96%. Weak fourth-quarter earnings, lower volumes in
hospitals and physician offices and regulatory pressure in the
Hospice industry further mar the prospects of the company.
Moreover, the changes proposed by the Centers for Medicare &
Medicaid Services (CMS) for Medicare Home Health Prospective
Payment System reduced Medicare reimbursements by 1%, thereby
adversely affecting Gentiva's earnings, which are significantly
reliant on Medicare earnings.
Gentiva is also involved in a number of legal hassles, which
raises the likelihood of higher settlement charges, thereby
increasing financial risks. Adverse litigation outcomes might
also dampen the goodwill of the company, thereby, hurting the
High legal and other costs along with poor operating results have
adversely affected Gentiva's operating cash flow as well, adding
to financial risks. If operating cash flow declines further,
Gentiva will be compelled to delay its planned capital
expenditures and cut short its capital deployment plans going
forward. With increased drug and selling, general and
administrative (SG&A) expenses in 2014, going ahead, the
company expects overall expenses to rise.
Nevertheless, amid the negatives, Gentiva's relentless efforts to
expand its operating leverage through inorganic growth strategies
and focus on specialty services are commendable. The Harden
acquisition in Oct 2013 boosted the Home Health and Community
Care businesses as per company expectations, while the Harden
Hospice business remained stable. Revenues and adjusted EBITDA
during the fourth quarter were favored by the Harden Healthcare
takeover, which positions Gentiva to achieve its 2014 revenue
goal of $1.9-$2.1 billion. Divestitures of non-core businesses
and low-return branches have also helped the company to enhance
core operations and boost cash balance.
Other Stocks to Consider
China Cord Blood Corporation
) are some better-ranked stocks in the healthcare services space.
While Chemed sports a Zacks Rank #1 (Strong Buy), Aetna and China
Cord carry a Zacks Rank #2 (Buy).
AETNA INC-NEW (AET): Free Stock Analysis
CHEMED CORP (CHE): Free Stock Analysis Report
CHINA CORD BLD (CO): Free Stock Analysis
GENTIVA HEALTH (GTIV): Free Stock Analysis
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