Why Gentiva Health Services, Inc. Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Gentiva Health Services (NASDAQ: GTIV  ) , a U.S. provider of home health and hospice care services, tumbled as much as 14% after the company reported weaker than expected fourth-quarter earnings.

So what: For the quarter, Gentiva reported a 14% increase in net revenue to $486.1 million as home health revenue rose 8% and hospice revenue declined modestly. A goodwill and impairment charge related to its October purchase of Harden Healthcare, though, resulted in a whopper of a quarterly loss: $401.9 million, or $11.46 per share. Backing out this charge, Gentiva lost an adjusted $0.14 per share, compared to a profit of $0.31 per share in the year-ago quarter. By comparison, Wall Street had been looking for roughly $504 million in revenue and a $0.29 per share profit! Gentiva attributed the shortfall to the corporate restructuring initiative announced during the quarter that resulted in the closing of 46 home-health branches and consolidation of an additional 31 sites as part of the Harden acquisition.

Now what: On one hand, home health and hospice care makes sense on paper as a business likely to see surging demand in the coming decades. With baby boomers just starting to retire the need for home health services is expected to soar, which would play right into Gentiva's hands. Also, at just nine times forward earnings it's not as if investors are paying too hefty a premium to get in on the company. On the other hand, Gentiva is looking toward an environment in which Medicare reimbursements are likely to keep falling as the U.S. government tries to reduce its health care expenditures as much as possible in accordance with Obamacare. I would suggest today's drop could mark an intriguing buy point, but I would also say investors should keep their expectations tempered and understand this isn't the type of company that could present slow but steady longer-term growth opportunities.

Even though the moat of opportunity for home health providers like Gentiva is huge, they may be unable to keep up with this top stock over the long run
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2863169, ~/Articles/ArticleHandler.aspx, 9/23/2014 6:26:24 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement