Zacks_Analysts' Blog : Gentiva to Exit CareCentrix - Analyst Blog

On Friday, Gentiva Health Services Inc. (GTIV) announced its intention to sell its residual 31% share in CareCentrix Holdings Inc. in the upcoming weeks. Net cash inflow from the sale for Gentiva is expected to be around $65-$70 million.

Previously, on September 25, 2008, Gentiva had sold a 69% stake out of its holding in CareCentrix to Water Street Healthcare Partners for $147 million. This ended Gentiva’s control over CareCentrix, which was established by the company in 1996. Gentiva’s sale proceeds in 2008 included $84 million in cash. Additionally, it received a $25 million receivable note, which carries an annual interest of 10%.

CareCentrix is a leading national provider of ancillary care benefit management services to major managed care organizations. It is headquartered in New York and has 5 regional centers.

Although Gentiva has not detailed the use of the funds, it is expected to utilize them towards reducing its borrowing cost or for corporate purposes, which could enhance its operating leverage. The company is a leading national provider of comprehensive home health services and competes with organizations like Amedisys Inc. (AMED) and Lincare Holdings Inc. (LNCR).

Gentiva reported second-quarter adjusted operating earnings of $15.1 million or 49 cents per share, lagging behind the Zacks Consensus Estimate of 65 cents. Additionally, the company’s total net revenues climbed 54.0% year over year to $456.9 million, beating the Zacks Consensus Estimate of $482.0 million.

Gentiva expects net revenues for 2011 to be in the range of $1.80-$1.85 billion and adjusted income from continuing operations to be in the range of $2.00-$2.20 per share.

The company carries a Zacks #5 Rank, implying a short-term Strong Sell rating.

On Friday, the shares of Gentiva closed at $7.29, down 0.41%, on the New York Stock Exchange.