Deutsche Bank Reiterates Buy Rating on Gentiva Health (GTIV)

Deutsche Bank is out with a research report this morning, where it reiterates its Buy rating on Gentiva Health Services GTIV; it has a $31.00 price target on the stock. The DB analysts believe that GTIV's recently completed Odyssey acquisition forces them to update their forecast with a more costly debt structure, slightly higher non-cash amortization and somewhat slower growth in the core home health business. Their official estimates after the acquisition is complete is as follows: 2010 rev of $1.465B ($1.19B) / 2011 rev of $2.0B ($1.245B), 2010 EBITDA of $185M ($139.9M) / 2011 EBITDA of $270.4M ($143M) and 2010 EPS of $2.81 ($2.74) / 2011 EPS of $2.77 ($2.43). Some key assumptions underpin the model: 1. “Odyssey 2011 rev and EBITDA contribution (before synergies) of $758M and $110M, respectively 2. GTIV’s weighted average cost of debt = 9%, with our interest expense now including ~$10M amortization of debt issuance costs 3. 2011 D&A of $31M, which includes incremental $6M of goodwill amortization 4. 2010 and 2011 synergies of $4.5M and $17M, respectively 5. A 40% tax rate (vs. 39% previously). It is important to note our 2011 GTIV home health segment model includes -4% to -5% pricing cuts based on the proposed rule (final rule due early November).”