Recently, we upgraded our recommendation on Gentiva Health Services Inc. (GTIV) to Outperform with a price target of $34. We upgrade the stock because of the strong financial results delivered in the fourth quarter of 2009 and the solid fundamentals of the company.
Gentiva is a leading provider of home health services in most parts of the United States and a provider of hospice services in south-east United States. Gentiva provides a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management education; help with daily living activities; and other therapies and services.
The company recently delivered impressive results for the fourth quarter of fiscal 2009. Gentiva earned 63 cents per share (excluding non-recurring transaction profits and special charges related to restructuring and merger and acquisition activities) in the reported quarter (ended Jan 3, 2010). This surpassed the Zacks consensus estimate by 9 cents and the year-ago earnings by 22 cents. Total net revenues for the quarter came in at $310 million, as against $267.3 million in the year-ago quarter, up 16%.
The company serves its patients and customers through its Home Health and Hospice segments. These two segments contributed approximately 93.5% and 7.5% respectively to total revenues of $1,152 million in 2009. Gentiva earned $2.19 (excluding special items) in 2009.
Apart from the impressive fourth quarter 2009 results, the company provided a bright outlook for 2010. Gentiva expects net revenues between $1.23 billion and $1.26 billion in 2010. The company expects revenue growth in 2010 to be driven mainly by organic volume growth and expansion of Gentiva’s innovative specialty programs. Furthermore, the company expects to earn (on an adjusted basis) between $2.57 and $2.67 per share. The guidance does not include results from the divested businesses and corresponding charges, any future acquisitions and special items.
The company’s diversified product portfolio pleases us. The diversified offerings enable it to meet the various healthcare needs of patients thereby expanding its customer base. Gentiva serves patients in more than 300 locations across 39 states. Furthermore, the company has grown through acquisitions and is looking to continue with this strategy.
We believe the current price represents an attractive entry point for investors and upgrade the stock to Outperform. Our price target is based on approximately 13.0x our 2010 earnings estimate of $2.62.
Read the full analyst report on “GTIV”
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