Disappointing 4Q for Gentiva

Zacks

Gentiva Health Services Inc. (GTIV) 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. Operating income of $9.7 million also declined from $11.3 million in the year-ago quarter.

Operating income for the reported quarter includes a loss of 1 cent due to the impact of Hurricane Sandy. Including all one-time charges and results from discontinued operations, Gentiva posted net income of $8.6 million or 28 cents per share, increasing from $4.6 million or 15 cents per share in the fourth quarter of 2011.

Gentiva’s net revenues declined 5% year over year to $425.0 million from $449.2 million in the year-ago quarter. Net revenue also missed the Zacks Consensus Estimate of $433.0 million. The year-over-year decline was largely due to a significant cut in the home health Medicare rates along with the sale and closure of some branches.

The Home Health Episodic segment revenue declined 3% year over year to $209.8 million. Additionally, the Hospice segment revenue declined 6% year over year to $187.3 million.

Adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) attributable to continuing operations decreased 6.2% to $44.2 million from $47.1 million in the prior-year quarter.

Full-Year 2012 Highlights

For full year 2012, Gentiva reported operating income of $37.7 million or $1.23 per share, substantially lower than $49.2 million or $1.60 per share in 2011. Earnings per share also lagged the Zacks Consensus Estimate of $1.29.

Earnings include credit agreement amendment fees of 3 cents and a negative impact of 1 cent due to Hurricane Sandy. Net income came in at $26.8 million or 87 cents per share against prior-year net loss of $450.5 million or $14.85 per share.

Net revenue was $1.71 billion, down 5% year over year from $1.80 billion in 2011. Net revenue missed the Zacks Consensus Estimate of $1.72 billion.

Financial Update

Gentiva exited 2012 with cash and cash equivalents of approximately $207.1 million, up from $164.9 million as of Dec 31, 2011. Long-term debt was $935.2 million, down from $973.2 million at 2011 end.

During the reported quarter, net cash from operating activities amounted to $51.3 million versus cash outflow of $9.2 million in the prior-year period. Free cash flow also improved considerably to $48.8 million from ($13.9) million in the fourth-quarter of 2011.

As of Dec 31, 2012, Gentiva had total assets of $1.51 billion and shareholders’ equity of $234.7 million, as compared with $1.53 billion and $202.5 million, respectively, as of Dec 31, 2011.

Zacks Rank

Gentiva carries a Zacks Rank #2 (Buy). Another healthcare company UnitedHealth Group Inc. (UNH) reported fourth-quarter 2012 earnings of $1.20 per share, in line with the Zacks Consensus Estimate. Earnings, however, increased 2.6% on a year-over-year basis.

Other healthcare companies such as LHC Group, Inc. (LHCG) and RadNet, Inc. (RDNT), carrying a Zacks Rank #2 (Buy), are expected to release their fourth-quarter 2012 earnings results shortly.

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