Gentiva Forecasts Strong Q2 Earnings Amid Snubbed Kindred Purchase Bids

After repeatedly rebuffing purchase proposals from Kindred Healthcare, Inc. (NYSE:KND), Gentiva Health Services, Inc. (NASDAQ:GTIV) has a favorable outlook on its second quarter financial performance, as earnings expectations remain high for the sought after company. 

For the second quarter ended June 30, 2014, Gentiva anticipates net revenues of $496 million, a 19.7% increase compared to net revenues of $414.4 million reported during the same period a year ago. 

Additionally, the company expects adjusted EBITDA of $52 million for the second quarter and income attributable to stockholders of $0.33 per diluted share, up from $39 million and $0.22 per share a year ago. 

The second quarter performance reflects the success of several changes and strategic investments Gentiva has made over the past year, said Executive Chairman Rod Windley in a statement.

“We strongly believe that today’s announcement provides further evidence that Gentiva’s strategy to increase stockholder value is working, reinforcing that Kindred’s offer grossly undervalues Gentiva and is not the best interest of Gentiva stockholders,” Windley stated. 

Kindred has been making plays at acquiring Gentiva as far back as April, when it made an unsolicited, non-binding proposal to acquire the company for $13 per share in cash and Kindred common stock.

This proposal was followed by several more attempts from Kindred, where the company upped its bid to $14 per share on May 5 and then increasing it again to $14.50 per share on May 15, when it publicly announced its previous unsolicited proposals.  

Each of the proposals were subsequently rejected by Gentiva’s board of directors, which urged company shareholders not to take action in response to Kindred’s offer. 

Of utmost concern for Gentiva regarding Kindred’s proposals is that the offers fail to “appropriately value Gentiva on a fundamental basis and relative to its public peers” and that the timing of the offer “exploits a decline in the company’s stock price,” according to a presentation the company provided to the Securities and Exchange Commission (SEC). 

The presentation, which outlined the reasons why Gentiva’s board had recommended stockholders reject Kindred’s offer, also suggests the proposal undervalues the company before Gentiva’s financials fully reflect earnings from Harden Healthcare Holdings, Inc., which it acquired in October 2013.

Earlier this year, Gentiva reported its acquisition of Harden helped boost first quarter profits to $0.3 million, or $0.01 per diluted share, compared to a net loss of $207.2 million, or $6.73 per share, in the first quarter of 2013.

“Kindred’s proposal is an attempt to set a value for Gentiva before the Company’s financials fully reflect Harden’s earnings, associated Harden synergies and operational improvements from the implementation of One Gentiva and other recent investments,” the company stated in its SEC presentation.

Looking ahead, Gentiva reaffirmed its full-year outlook for 2014, expecting net revenues to be in the range of $1.9 billion to $2.1 billion.

Additionally, the company anticipates adjusted EBITDA to be in the range of $177 million to $195 million and income attributable to Gentiva stockholders in the range of $0.85 to $1.15 per diluted share. 

The 2014 outlook includes the anticipated full-year impact of Gentiva’s acquisition of Harden, as well as the final 2014 Medicare home health and hospice reimbursement rates issued by the Centers for Medicare & Medicaid Services, the company stated.

Written by Jason Oliva