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Analyst Blog

Yesterday, Gentiva Health Services Inc. announced the acquisition of North Mississippi Hospice for an undisclosed price. While the financial terms of the deal were not divulged, Gentiva revealed that it will finance the purchase from its cash reserves.

The transaction is unlikely to materially affect Gentiva’s earnings in the future. However, it will significantly expand the company’s presence in the Northern Mississippi market as North Mississippi Hospice has branches in Tupelo, Oxford and Southaven in Mississippi. The hospice provider, which was founded in 2006, is based in Oxford, Mississippi.

Gentiva has been using its cash reserves to support its inorganic growth strategy and has been on an acquisition spree in the recent times. North Mississippi Hospice is the third acquisition announced in this quarter.

Earlier this month, Gentiva announced that it has purchased the home health and hospice operations of Washington-based Family Home Care Corporation. Previously, in July 2012, the company announced the acquisition of Indiana-based Advocate Hospice, a leading provider of end of life care.

These acquisitions are aimed at expanding Gentiva’s operating scale as well as its geographic coverage. While the purchase of Family Home Care will expand the company’s foothold in the eastern Washington and northern Idaho markets, the acquisition of Advocate Hospice will expand its coverage in central and southern Indiana and leverage its existing hospice and home health facilities in the state. However, similar to the case of North Mississippi Hospice, these acquisitions are not expected to have a material impact on Gentiva’s earnings.

Gentiva, which competes with Amedisys Inc. , carries a Zacks #2 Rank, translating into a short-term Buy rating. We maintain a long-term ‘Outperform’ recommendation on the stock.

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