PacifiCare Stock Drops 8.9% on Quarterly Data

The price of PacifiCare Health Systems Inc. stock dropped 8.9% Wednesday after the company said its earnings for the second quarter would fall below analysts’ estimates.

David Erickson, the health insurer’s manager of investor relations, said the company now expects to earn about $1 a share for the period ending March 31, 8 cents below analysts’ average estimates.

The company’s common stock dropped $8 a share to $82 as 410,000 shares changed hands in Nasdaq trading. Similarly, nonvoting stock fell $6.625 a share to $84.50, with 2.1 million shares traded.

Two brokerage firms, Cowan & Co. and Schroder Wertheim & Co., reduced their ratings on the stock. Cowan changed its “buy” recommendation to a “neutral” and Schroder dropped from a “strong buy” to a “mediocre buy,” Erickson said.

Among other problems, the company cited slow progress in its efforts to make its Florida operations profitable. While California is its core market, the company has been expanding into Florida and other states in recent years.

The company has bought two health maintenance organizations in Florida, where it now has 58,000 members being served by 2,000 doctors, Erickson said. But it continues to lose money because doctors in general there haven’t learned to work as efficiently under managed care as their California counterparts, Erickson said.

Thomas Hodapp, an analyst at Robertson, Stephens & Co. in San Francisco, attributed the company’s diminished second-quarter outlook to several other factors as well. He noted that it faced unexpected pressure to cut premiums in its San Antonio market, higher drug costs than budgeted, and continuing expenses in efforts to expand its preferred provider organization in California.