Sell Recommendations Jolt Psychiatric Center’s Stock

Community Psychiatric Center’s stock lost nearly 6.5% of its market value Tuesday after two major brokerages encouraged investors to sell their holdings just a day after the company released its annual earnings report.

The Laguna Hills-based chain of acute psychiatric hospitals saw its stock fall $1.625 to close at $23.625 per share on the New York Stock Exchange.

The New York brokerage of Shearson Lehman Hutton reportedly changed its recommendation on the stock from a “hold” to a “sell” order Tuesday. Prudential-Bache Securities reiterated a “sell” order it sent out earlier this month.

Analysts at both firms were unavailable for comment Tuesday.

The brokerages were concerned about a slowdown in the growth of fourth-quarter revenue, particularly in the company’s adolescent treatment units.

On Monday, Community Psychiatric reported that its earnings rose 14% to $80.4 million for its fiscal 1989 year ended Nov. 30, from $70.8 million for fiscal 1988.

The 1989 figure includes net income from discontinued operations for nine months, while the 1988 figure includes 12 months from the dialysis and home health divisions, which were spun off in September, 1989.

Revenue for the year increased 21% to $330.7 million, from $273.3 million.

For the fourth quarter, net earnings declined 3% to $16.5 million, from $16.9 million for the comparable 1988 period. Revenue rose 11% to $80.1 million, from $72.3 million.