Analysts at Deutsche Bank retained Hold rating on the shares of Gentiva Health Services Inc. (Nasdaq: GTIV) with a price target of $5.50.They state that GTIV's Q3 FY 2011 results were clearly disappointing and provide further evidence that home health margins are unstable, and organic growth in hospice remains elusive.
DB analysts state that while GTIV's operating performance leaves plenty of uncertainty, management is taking necessary actions through a restructuring and a plan to address debt covenants over the near-term. In its FY 2011 Q3, GTIV's adjusted income from continuing operations attributable to shareholders of $8.3 million, compared with $21.6 million in the comparable 2010 period. On a diluted per share basis, adjusted income from continuing operations attributable to Gentiva shareholders was $0.27 for the third quarter of 2011 compared to income of $0.71 for the third quarter of 2010. GTIV's EPS of $0.27 fell short of Wall Street consensus of $0.48 per share. The company's total revenues of $449.7 million were below consensus of $457 million. While health services revenue were down 3 percent year-on-year due to rate cuts, admission growth of 5 percent was above expectations and a result of the company's recent sales force initiatives. HH segment margins were a big disappointment at 11.3 percent, down from 13.7 percent in Q2. Hospice revenues were in-line with DB analysts' estimates, although organic volumes were down -3.0 percent year-on-year and segment EBITDA margin of 16.4 percent was well below Q2's 18.9 percent. GTIV announced a new cost cutting initiative that includes closing 42 branches and reducing its workforce by 1,000 FTEs. DB analysts think this initiative could generate $40-$50 million in annual savings. At current EBITDA projections for FY 2012, DB analysts have GTIV tripping its leverage covenant in FY 2012 Q4. GTIV's management revised FY 2011 guidance down to $1.78 billion-$1.82 billion from $1.80 billion-$1.85 billion and EPS to $1.50-$1.70 from $2.00-$2.20. Management also revised its Medicare rate impact for 2012 to $30-$35 million from $40-$45 million to acct for the final CMS rule, which reduced the impact to certain therapy codes and provided for a case mix adjustment 100 bps better versus proposal. DB analysts FY2012 estimates are revenues of $1.77 billion, from $1.85 billion, EBITDA of $172.9 million from $172.6 million, and EPS of $1.14 from $1.25.
On a year-to-date basis, GTIV has a share performance of -85.26 percent, and as compared to Standard & Poor's, it has an YTD share performance of 1.97 percent.
GTIV is the largest provider of home health and hospice services based on revenue, delivering innovative, high quality care to patients across the US. It has a market capitalization of $112.33 million with a P/E ratio of 2.64.
Shares of GTIV were down 6.38 percent, or $0.25 to trade at $3.67.