Gentiva Reveals Weak EPS Outlook

On Monday, Gentiva Health Services Inc. (GTIV - Analyst Report) announced its projection of income from continuing operations attributable to its shareholders of $1.00–1.20 per share for 2012. The Zacks Consensus Estimate of $1.11 lies within the guided range.

The earnings outlook shows a sharp decline from $1.68 per share earned in 2011, primarily owing to the impact of an interest rate hike announced earlier this month. Gentiva had raised the interest rates on the term loans taken under its senior secured credit facility by 1.75% per annum, as a part of an amendment to its senior secured credit agreement.

Other amendments include alteration of the definition of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), increase in the maximum limit for the consolidated leverage ratio and relaxation of the minimum interest coverage ratio requirement. The earnings guidance includes the impact of the amendments to the senior secured credit agreement.

Additionally, Gentiva affirmed its adjusted EBITDA projection of $170–190 million and net revenue guidance of $1.70–1.76 billion for 2012. The Zacks Consensus Estimate for the company’s 2012 revenue stands at the upper limit of the guidance range at $1.76 billion. Its adjusted EBITDA guidance excludes expenses related to acquisitions, restructuring, integration activities, cost saving initiatives, legal settlements and other special charges.

Concurrently, Gentiva announced a stock repurchase plan under Rule 10b5-1 of the U.S. Securities and Exchange Commission. The rule allows the company to override restrictions on buybacks imposed due to access to substantial non-public information or self-imposed trading black out periods. Thus, the company can appoint a broker to buy shares in its name under the present share repurchase authorization, subject to certain regulatory, pricing, volume and timing restrictions.

Another healthcare company, Molina Healthcare Inc. (MOH - Analyst Report) provided its operating earnings guidance of $1.80 per share for 2012, marginally ahead of the Zacks Consensus Estimate of $1.75.

Shares of Gentiva currently carry a Zacks #2 Rank, implying a short-term ‘Buy’ rating. Furthermore, considering the fundamentals, we maintain our long-term ‘Neutral’ recommendation on the shares.