On Jun 17, 2014, Gentiva Health Services Inc. (GTIV) scaled a new 52-week high of $14.72. The company’s shares have been riding high, mainly driven by its strong first-quarter 2014 earnings, inorganic growth strategies and aggressive cost cuts.
Gentiva’s first-quarter earnings of 13 cents per share surpassed the Zacks Consensus Estimate by 18.18%. However, earnings declined from the year-ago quarter owing to a disruption in operations caused by a severe winter.
Nevertheless, following the earnings release on May 7, 2014, Gentiva’s shares gained 67.5% to close at $14.71 in the last trading session. The one-year return from the stock was 27.91%, above Nasdaq’s return of 26.69% and that of other players in the healthcare services space like Almost Family Inc. (AFAM) and Amedisys Inc. (AMED), which generated returns of 7.73% and 0.86% respectively over the same period.
Moreover, Gentiva has been successful in growing inorganically. In particular, the Harden acquisition in Oct 2013 helped the company to deliver impressive results. Episodic admissions during the first quarter of 2014 were also affected positively by this acquisition, and are expected to increase further going forward. The company hopes to continue its acquisition spree in hospice and home health to improve its market density, provide quality service and drive long-term growth. Gentiva also partnered with Wake Forest Baptist Medical Center in Sep 2013 to enhance its post-acute solutions services for seniors.
Further, Gentiva’s cost management initiatives are impressive. The company has remained focused on reducing direct expenses to increase margins. Notably, the company began reducing its direct expenses since the fourth quarter pertaining to the drop in average daily patient census. A rise in margins is expected to continue through the rest of 2014 on the back of these expense reduction initiatives.
Over the last 60 days, the Zacks Consensus Estimate for 2014 increased 3.4% to 91 cents per share as most of the estimates moved north. Over the same period, the Zacks Consensus Estimate for 2015 increased 4.1% to $1.02 per share. This also translates into a year-over-year improvement of 117.06% and 11.44% for 2014 and 2015, respectively.
Currently, Gentiva carries a Zacks Rank #3 (Hold). However, better-ranked players in the same industry include Almost Family, Amedisys and HEALTHSOUTH Corp. (HLS). While Almost Family sports a Zacks Rank #1 (Strong Buy), Amedisys and HEALTHSOUTH have a Zacks Rank #2 (Buy).
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