Gentiva's New Healthy Acquisition

On June 24, 2009, Gentiva Health Services (GTIV - Analyst Report) announced it had acquired Mid-State Home Health, one of central Louisiana's top-three home healthcare providers.

Established in 1991, Mid-State covers a 50-mile radius from its base in Alexandria that extends across 11 parishes in central Louisiana. Gentiva does not currently operate in this coverage area, but does provide services in an adjacent area.

The transaction is being funded from GTIV's existing cash reserves. The acquisition is not expected to have a material impact on GTIV's financial position or results of operations in 2009.

GTIV reported better than expected 1Q09 adjusted net income of $12.7M, or adjusted EPS of $0.43 (compared with consensus of $0.42). Cash on the balance sheet as at March 31, 2009, was $79.6M versus long-term debt of $237M.

Notwithstanding reimbursement risk related to current healthcare reform initiatives in Washington, we believe the growth of specialty program and hospice revenues during the quarter bodes well for margin expansion over the short term and rate the stock a Buy at current levels.