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Gentiva Health Services (GTIV)

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Gentiva Health Services' (GTIV) third-quarter 2011 earnings lagged the Zacks Consensus Estimate, on the back of high interest payments as well as increasing operating expenses, thereby leading to a net loss and a negative operating cash flow. Reimbursement rate cuts and divestitures have led to reduced earnings guidance for 2011.

Ratings downgrade and legal trouble were the other downsides. Overall, the future outlook for Gentiva does not look very promising.

Our six-month target price of $5.00 equates to 3.0x our earnings estimate for 2011. This price target implies an expected total negative return of 7.9% over that period. This is consistent with our Underperform recommendation on the shares.

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