Analysts downgrades Gentiva to 'Underperform'

Shares of Gentiva Health Services Inc. fell Thursday after a Raymond James analyst lowered his rating on the home-care and hospice operator due in part to looming federal budget cuts and the stock's run so far this month.

THE BIG PICTURE: Steep federal budget cuts known as sequestration are slated to start next month, and that will include funding cuts for Medicare, the federal program that provides coverage for the elderly and disabled people.

Shares of Gentiva had climbed about 17 percent in February to close at $11.55 on Wednesday. The stock has also climbed about 15 percent since closing 2012 at $10.05.

On Feb. 7, the Atlanta company said its fourth-quarter earnings soared 87 percent to $8.6 million, or 28 cents per share, compared to the final quarter of 2011, when it took several one-time charges to cut costs and for restructuring, legal settlements and acquisitions.

Gentiva also said its revenue fell 5 percent to $425 million due to a home health Medicare rate reduction last year and the sale or closure of some branches.

THE ANALYSIS: Analyst John W. Ransom said Thursday in a research report that he lowered his rating on the stock to "Underperform" from "Market Perform."

He noted that shares have already climbed this month despite fourth-quarter results he found disappointing. He also said that while the company's valuation largely reflects sequestration funding cuts, the home health business could wind up at risk again later this year if there are more deficit discussions.

Ransom also said Gentiva's hospice revenue has been disappointing since it acquired hospice care company Odyssey Healthcare Inc. in 2010 for $1 billion.

SHARE ACTION: Down 4.2 percent, or 49 cents, to $11.06 in afternoon trading, while the Nasdaq exchange fell 1.3 percent.