Zacks Investment Research downgraded shares of Gentiva Health Services Inc. (GTIV) from OUTPERFORM to NEUTRAL on October 15, 2012, with a target price of $11.00.
We are downgrading our recommendation on Gentiva to Neutral based on increased operating and interest expense burden, and expected negative impact of reimbursement rate cuts. The company's second quarter earnings surpassed the Zacks Consensus Estimate but lagged the year-ago quarter's earnings on the back of lower revenues, particularly in the Home Health segment. However, reduced debt and enhanced free cash balance improved financial leverage, while superior operating performance boosted net cash from operating activities. Additionally, the divestiture of some Louisiana branches has significantly augmented cash. Moreover, the steps taken to restructure operations should show results in the forthcoming quarters, while the strategic divestitures are expanding market share. Overall, we expect a modest growth potential for the company in the long term.
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