New Year Real Downer for Nichols’ Stock : Wall Street: The company’s shares continued to fall Monday in reaction to announcement of lower profits than anticipated.
The stock of Nichols Institute continued its free-fall Monday, down $3.375 to $10.25, as investors continued to react negatively to an announcement last week that net income for 1990 would be lower than analysts’ projections.
The company’s stock has fallen 37.8% from $16.50 on Thursday, when officials said earnings for the year and fourth quarter would be lower than most Wall Street analysts had anticipated because of problems in several new operations.
Trading in Nichols’ stock was halted Friday on the American Stock Exchange as sellers substantially outnumbered buyers. The company issued a clarifying statement Friday in an effort to calm investors’ fears. Trading resumed Monday.
Marilyn Hauge, director of investor relations at Nichols, said one of the key points the medical laboratory chain is trying to convey to investors is that “though we did announce our earnings would be less than analysts were projecting, Nichols still will be posting good earnings for the year.”
Nichols has projected that its net income for 1990 will be in the range of $6.9 million to $7.2 million, an increase of about 45% over the $4.8 million in earnings reported for 1989. However, analysts previously had projected that Nichols would post annual earnings of $7.8 million in 1990, said Arda Minocherhomjee, a health care analyst with Chicago Corp.
The drop in fourth quarter projections is even greater. Minocherhomjee said analysts had been projecting that Nichols would realize fourth quarter earnings of about $2.1 million. The company now says it expects that figure to be closer to $1.4 million, about the same level of earnings it posted for the fourth quarter last year.
The company said its fourth quarter results were less than expected because several new operations have not generated as much revenue as expected to offset start-up costs.
Nichols said revenues failed to meet projections at its Portland Regional Laboratory in November and December after roads serving the facility were closed because of severe weather. The company also said its new substance abuse testing program had a revenue shortfall because of a lower-than-expected referral of job applicants, reflecting a slowdown in the economy.
Moreover, the company said it has suffered from delays in completing purchases of outpatient laboratories in Texas that were planned to generate revenue to offset the cost of opening a new joint-venture laboratory in Dallas.
Minocherhomjee said he remains optimistic about long-term earnings growth at Nichols, which in November made Forbes magazine’s ranking of the 200 best small companies in America.
He said the drop in Nichols’ stock price shows that “Wall Street in a bad market doesn’t want to hear any bad news.” Nichols Institute Stock Nosedives A share of Nichols Institute stock has lost 37.8% of its value since the company announced that net income would be below expectations. In dollars per share Jan. 1991: $9.25 Source: Dow Jones
