Gentiva Beats, Raises 2012 Guidance

Gentiva Health Services Inc. ( GTIV - Analyst Report ) reported third-quarter 2012 operating net earnings of 32 cents per share, modestly beating the Zacks Consensus Estimate of 29 cents as well as year-ago quarter level of 27 cents per share. Operating net income of $9.9 million also compares favorably with $8.3 million in the year-ago quarter.

Including all one-time charges and results from discontinued operations, Gentiva posted net loss of $0.5 million or 2 cents per share, contracting substantially from the prior-year net loss of $473.8 million or $15.62 per share.

Gentiva’s net revenues declined 6% year over year to $424.4 million and also missed the Zacks Consensus Estimate of $428.0 million. The year-over-year decline was largely due to the sale and closure of some branches coupled with a 6% decline in the Home Health Episodic segment revenue to $206.4 million. This was followed by a year-over-year decline of 3% related to the Hospice segment revenue of $189.8 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to continuing operations increased 11.1% to $46.1 million from $41.5 million in the prior-year quarter.

Financial Update

Gentiva exited the quarter with cash and cash equivalents of approximately $156.0 million, down from $164.9 million as of December 31, 2011. Long-term debt was $938.1 million, down from $973.2 million at 2011 end.

During the reported quarter, net cash from operating activities amounted to $25.5 million versus a cash outflow of $5.5 million in the prior-year period. Free cash flow also improved considerably to $23.2 million from a negative $11.4 million in the third-quarter of 2011.

As of September 30, 2012, Gentiva had total assets of $1.48 billion and shareholders’ equity of $222.75 million, as compared with $1.53 billion and $202.5 million, respectively, as of December 31, 2011.

Outlook for 2012

Gentiva hiked its guidance for adjusted income from continuing operations to $1.20–$1.30 per share from $1.00–$1.20 guided earlier. Additionally, the guidance for net revenue was revised to $1.71–$1.74 billion from $1.70–$1.76 billion. However, the guidance does not include any impact of sequestration or Hurricane Sandy on the fourth quarter earnings.

Zacks Rank

Gentiva carries a Zacks #3 Rank, which translates into a short-term Hold rating. The company’s close competitor Amedisys Inc. ( AMED - Snapshot Report ) also shares the Zacks #3 Rank, and is expected to release its third-quarter 2012 earnings before the market opens on November 6, 2012. According to the Zacks Consensus Estimate, Amedisys is expected to report operating earnings of 27 cents a share, falling 25.6% from its prior-year quarter earnings.