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Weak Q2 Earnings for Gentiva, View Down

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Gentiva Health Services Inc. reported second-quarter 2013 operating earnings of 22 cents per share, which surpassed the Zacks Consensus Estimate of 20 cents but lagged the year-ago quarter level of 35 cents per share. Operating income of $6.8 million also declined from $10.7 million in the year-ago quarter.

Including cost savings, restructuring, legal settlement and acquisition and integration costs of $0.45 million or 2 cents per share, Gentiva posted net income of $6.3 million or 20 cents per share, down from $13.9 million or 46 cents per share in the second quarter of 2012.

Gentiva’s net revenue declined 3% year over year to $414.4 million from $427.7 million in the year-ago quarter. Net revenue also missed the Zacks Consensus Estimate of $416 million. The year-over-year decline was largely due to a cut in the home health Medicare rates along with the impact of sequestration and sale and closure of some branches.

The Home Health Episodic segment revenues declined 0.4% year over year to $206.7 million. Additionally, the Hospice segment revenues declined 7% year over year to $179.2 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to continuing operations decreased 19.3% to $39 million from $48.3 million in the prior-year quarter.

Financial Update

Gentiva exited the reported quarter with cash and cash equivalents of approximately $185.1 million, up from $159.6 million as of Mar 31, 2013. Outstanding debt was $910.2 million, at par with Mar 31, 2013.

During the reported quarter, net cash from operating activities amounted to $30.7 million, lower than $83.8 million in the prior-year period. Free cash flow also declined to $25.9 million from $80.7 million in the second quarter of 2012.

As of Jun 30, 2013, Gentiva had total assets of $1.26 billion and shareholder equity of $39.1 million, as compared with $1.51 billion and $234.7 million, respectively, as of Dec 31, 2012.


Gentiva’s net revenue guidance for 2013 was reduced to $1.67–$1.70 billion from $1.69–$1.73 billion. The company lowered its guidance based on its performance in the first half of 2013 as well as the expected impact of the proposed 2014 Medicare home health and hospice reimbursement rules on the fourth-quarter results. Gentiva expects adjusted income from continuing operations between 90 cents and $1.10 per share.

Zacks Rank

Gentiva carries a Zacks Rank #5 (Strong Sell). Some medical outpatient and home care companies worth considering are LCA-Vision Inc. – Zacks Rank #1 (Strong Buy), AmSurg Corp. – Zacks Rank #2 (Buy) and China Cord Blood Corporation – Zacks Rank #2 (Buy).

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