FHP’s Quarterly Net Jumps 79%, Exceeding Estimates by Analysts

FHP International Corp. reported Thursday that earnings leaped 79% for its second fiscal quarter, exceeding analysts’ estimates.

Analysts attributed the gains in part to the managed-care company’s cuts in administrative and marketing expenses in anticipation of its acquisition by Orange County rival PacifiCare Health Systems Inc.

FHP has refrained from spending on marketing materials and billboards that would push the FHP name and isn’t hiring staff, said Kenneth Abramowitz, analyst at Sanford C. Bernstein.

The company earned $24.9 million, or 44 cents a share, for the three months ended Dec. 31, up from $13.9 million, or 18 cents, for the same period a year ago. Analysts had estimated earnings of about 39 cents a share for the second quarter. Revenue increased 9% to $1.1 billion from $1 billion.

For the first six months, net income rose 74% to $48.5 million, or 84 cents, from $27.8 million, or 36 cents, in the year-ago period. Revenue rose 9.2% to $2.21 billion from $2.02 billion.

FHP stock closed Thursday at $35 a share in Nasdaq trading, up just 37.5 cents for the day. Abramowitz said Wall Street barely noticed FHP’s earnings performance because analysts quit following the stock when the PacifiCare deal was announced in August.

On Monday, PacifiCare posted higher earnings for its first fiscal quarter but shaved its profit projections for the year, citing merger delays. Officials told analysts that for every week regulators delay, the company loses $2 million to $3 million in expected savings as a combined entity.