PacifiCare Stock Falls Again After Profit Warning
PacifiCare Health Systems Inc. shares continued to fall Wednesday, a day after the managed-care company warned analysts that some second-quarter financial estimates were too high.
On Tuesday, the Santa Ana-based company called certain analysts and told them to lower their expectations for the upcoming quarter. PacifiCare now expects to report earnings between $1.45 and $1.50 a share, compared with the First Call Corp. consensus estimate of $1.58 a share, according to several analysts.
The profit warning came as a surprise to many, especially since the company had been touting its growth prospects in recent weeks. When the first-quarter results were released in early May, PacifiCare, in a news release, increased expectations, saying it saw earnings-per-share growth between 40% and 45% for the year.
That positive projection excluded the effects of a buyback of 13% of its shares from its largest shareholder, UniHealth Foundation.
The stock, which tumbled 14% on Tuesday, dropped another 3%, or $2.25 a share, on Wednesday, closing at $71.75.
After the positive announcement about first-quarter results, PacifiCare had complained to some investors and analysts that its growth projections weren’t being rewarded with a higher stock price.
“It’s a good thing we didn’t reward them,” said Sheryl Skolnick, an analyst with BancBoston Robertson Stephens.
Skolnick was among a number of analysts critical of how PacifiCare issued the warning: calling individuals over the last few days to tell them their models were flawed.
Since PacifiCare raised expectations in its second-quarter earnings model, “there’s a standard that’s set, that, if you’re going to lower [expectations], you better put it in writing as well,” Skolnick said.
A PacifiCare spokeswoman said the company was surprised by the market’s reaction to the earnings news, since the company had been “communicating the same message” for some time.
The company was trying to temper some of the “tremendous amount of enthusiasm by Wall Street” that followed the first-quarter earnings and get some analysts “back in line,” she said.
PacifiCare chose not to release a formal statement because it doesn’t believe the adjustments are material.
Including the buyback, PacifiCare now expects to earn between $6.20 and $6.31 a share in 1999, the spokeswoman said. A survey of analysts by First Call Corp. puts earnings at $6.31. The company earned $4.40 a share in 1998.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Stock Slump
PacifiCare Health Systems Inc. shares fell for the fifth consecutive session Wednesday, closing at $71.75. That’s a 29% decline from the $100.38 52-week high the stock achieved about six weeks ago. The Medicare HMO operator had warned some analysts that their quarterly earnings forecasts are too high. Daily closing prices:
May 3: $78.63
May 4: $79.88
May 5: $93.81
May 6: $91.50
May 7: $88.13
May 10: $90.69
May 11: $89.69
May 12: $85.75
May 13: $82.75
May 14: $81.88
May 17: $83.50
May 18: $86.25
May 19: $88.13
May 20: $88.97
May 21: $86.50
May 24: $85.88
May 25: $85.38
May 26: $87.88
May 27: $88.50
May 28: $86.38
June 1: $87.94
June 2: $92.00
June 3: $90.50
June 4: $91.50
June 7: $91.00
June 8: $90.38
June 9: $88.19
June 10: $89.00
June 11: $90.63
June 14: $90.56
June 15: $90.63
June 16: $90.69
June 17: $90.00
June 18: $88.50
June 21: $85.63
June 22: $74.00
Wednesday close: $71.75
Source: Bloomberg News
