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Weak 1Q Earnings for Gentiva

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Gentiva Health Services Inc. reported first-quarter 2013 operating earnings of 23 cents per share, which lagged the Zacks Consensus Estimate of 31 cents as well as the year-ago quarter level of 24 cents per share. Operating income of $7.1 million also declined from $7.4 million in the year-ago quarter.

Including a non-cash impairment charge of $224.3 million related to goodwill and other long-lived assets, along with restructuring, legal settlement and acquisition and integration costs of $0.14 million, Gentiva posted a net loss of $207.2 million or $6.73 per share, compared with net income of $4.8 million or 16 cents per share in the first quarter of 2012.

Gentiva’s net revenue declined 5% year over year to $415.6 million from $435.7 million in the year-ago quarter. Net revenue also missed the Zacks Consensus Estimate of $428 million. The year-over-year decline was largely due to a significant 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 2% year over year to $207.4 million. Additionally, the Hospice segment revenues declined 8% year over year to $179.5 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to continuing operations decreased 6.7% to $39.1 million from $41.9 million in the prior-year quarter.

Financial Update

Gentiva exited the reported quarter with cash and cash equivalents of approximately $159.6 million, down from $207.1 million as of Dec 31, 2012. Outstanding debt was $910.2 million, down from $935.2 million at 2012 end.

During the reported quarter, net cash used in operating activities amounted to $20.6 million, narrower than the cash outflow of $34.7 million in the prior-year period. Free cash flow also narrowed to ($23.3) million from ($38.5) million in the first-quarter of 2012.

As of Mar 31, 2013, Gentiva had total assets of $1.24 billion and shareholder equity of $29.6 million, as compared with $1.51 billion and $234.7 million, respectively, as of Dec 31, 2012.


Gentiva’s net revenue guidance for 2013 stands at $1.69–$1.73 billion. This guidance includes a negative impact of $21 million from the sale and closure of branches in 2012. The company expects adjusted income from continuing operations between 90 cents and $1.10 per share, calculated on the basis of 31 million outstanding shares.

Zacks Rank

Gentiva carries a Zacks Rank #5 (Strong Sell). Another healthcare company DaVita HealthCare Partners Inc. (DVA - Free Report) reported first-quarter 2013 operating earnings of $1.84 per share, beating the Zacks Consensus Estimate of $1.78 as well as $1.50 per share reported in the prior-year quarter.

Other healthcare companies worth considering are Addus HomeCare Corporation (ADUS - Free Report) and HEALTHSOUTH Corp. . Both these companies carry a Zacks Rank #1 (Strong Buy).

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