On Mar 23, 2013, Zacks Investment Research downgraded Gentiva Health Services Inc. (GTIV - Analyst Report) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Gentiva has witnessed a downturn in estimates since reporting its fourth-quarter earnings. The Zacks Consensus Estimate for 2013 has declined almost 28% since the company’s earning release.
On Feb 7, 2013, Gentiva reported fourth-quarter 2012 operating earnings of 31 cents per share, which lagged the Zacks Consensus Estimate of 35 cents as well as the year-ago quarter level of 37 cents per share.
Gentiva’s net revenues declined 5% year over year to $425.0 million, largely due to a significant cut in the home health Medicare rates along with the sale and closure of some branches. It also missed the Zacks Consensus Estimate of $433.0 million.
Further, the company’s guidance for 2013 is significantly lower than the 2012 level due to the impact of sequestration and changes in Medicare rates. On Mar 20, 2013, Gentiva revealed that it expects adjusted income from continuing operations between 90 cents and $1.10 per share, substantially lower than the Zacks Consensus Estimate of $1.29 at that time.
The lower-than-expected guidance led to a downward revision in estimates by all the analysts covering the stock. As a result, the Zacks Consensus Estimate declined as well. Currently, the Zacks Consensus Estimate for 2013 stands at $1.01, down nearly 18% year over year.
Other Stocks to Consider
Not all healthcare companies are performing as poorly as Gentiva. Some healthcare stocks with favorable Zacks Rank are Addus HomeCare Corporation (ADUS - Snapshot Report) – Zacks Rank #1 (Strong Buy), LCA-Vision Inc. – Zacks Rank #2 (Buy) and Coventry Health Care Inc. – Zacks Rank #2 (Buy).