Urohealth Shares Continue Fall, Dip 16%
Shares of Urohealth Systems Inc. plunged Thursday for the third consecutive day, slumping 16% on continued concerns over the company’s latest earnings report.
Urohealth, which makes medical supplies, said Wednesday that earnings for its fiscal year ended March 31 wouldn’t meet analysts’ expectations of 47 cents a share. Then on Thursday, the investment firm Bear Stearns & Co. downgraded Urohealth’s stock to neutral from attractive and said it expects the company to record a fourth-quarter operating loss.
On Wednesday, Jefferies & Co. said that it was downgrading the company’s stock to accumulate from buy.
Urohealth’s stock fell by $1 a share Thursday to $5.31 in Nasdaq trading. A total of 5.25 million shares changed hands, more than 12 times the stock’s average daily trading volume.
So far this week, the company’s stock has lost 41% of its value. The stock had slumped Tuesday after the company delayed its latest earnings report for the fiscal year and fourth quarter.
The anticipated earnings shortfall became evident after Urohealth auditors advised the company that $18 million in revenue--18% of the company’s projected sales for the last fiscal year--could not be counted.
An accounting change prohibits the company from recording sales of certain surgical products when they are sent to distributors. Instead, the sales are to be recorded when the products are finally sold.
The auditors also appear concerned that Urohealth hasn’t had a long relationship with the distributors, Bear Stearns said. Urohealth turned to the distributors in December to meet a sharp increase in orders for surgical products.
“It’s an accounting issue, not a business issue,” said Mike Petusky, an analyst at Branch Cabell & Co., who is reviewing his rating of the stock.
Petusky said that Urohealth’s basic business remains sound, having built itself through a flurry of acquisitions in the past two years. “I feel the company has taken a couple of positive steps in the past few years,” he said.
Urohealth didn’t return calls seeking comment.
On Tuesday, the company delayed for the third time the release of its fiscal fourth-quarter earnings, saying its annual audit proved to be unexpectedly complex and time-consuming. It now expects to release earnings by Monday.
In the nine months ended Dec. 31, Urohealth lost $19.4 million on net sales of $68 million.
Urohealth specializes in products used in urology, surgery and gynecology. It has acquired 17 companies in a two-year buying spree.
In April, Urohealth agreed to buy Imagyn Medical Inc., a Laguna Niguel maker of gynecological devices, in a stock deal then valued at about $64 million. On Thursday, Imagyn’s stock fell 75 cents a share to $5.75 in Nasdaq trading.
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Tandem Trails
Urohealth and Imagyn stock prices have been rising and falling in near-concert since Urohealth said it would acquire Imagyn April 21. Weekly closing prices:
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Urohealth Imagyn April 4 $9.00 $7.50 11 9.13 8.88 18 8.25 9.13 25 8.75 7.75 May 2 8.00 6.88 9 8.13 7.25 16 8.00 6.88 23 8.75 8.25 30 8.50 8.19 June 6 9.31 9.00 13 9.00 8.50 20 9.00 9.00 Thursday’s close: 5.31 5.75
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Source: Bloomberg News
