PacifiCare Stock Surges for 2nd Day

Shares of PacifiCare Health Systems Inc. surged for the second consecutive day Thursday, amid continued investor enthusiasm on the heels of the company’s bullish projections for the coming year.

PacifiCare, the nation’s largest Medicare HMO, announced Tuesday that it was raising its 2001 outlook to $2.94 a share, almost $2 above Wall Street’s consensus estimates, and revealed plans to turn around its lagging fortunes by remaking itself into a diversified health-care company.

After surging 35% Wednesday, the stock moved up as much as 13% during Thursday’s session before backing off a bit to close at $35.63, up $2.13, on the Nasdaq market.

Analysts and management attributed the rising stock price, at least partly, to investor enthusiasm over the new, and highly bullish, outlook. But observers also credited at least part of the move to short sellers covering their positions.

As of Jan. 15, more than 4.6 million shares of PacifiCare were being held in short positions. The company has about 34 million outstanding shares and a float of 10.2 million shares--stock available for trading by the public.

Until this week, PacifiCare had not provided any estimates for 2001. As a result, analysts’ expectations ranged from a loss of $2.18 a share to a profit of $2.30 a share.

Meanwhile, PacifiCare’s decision to develop and offer an assortment of new products and services, including a women’s health network and a preferred provider organization, or PPO, has been applauded by many as a much-needed step if the company wishes to revive its fortunes and compete with rivals such as United Health Group, Cigna Corp. and Wellpoint Health Networks.

“‘The stock went up because it was a reasonable and well-thought-out action plan by a chief executive with a good reputation on Wall Street,” said Deutsch Banc Alex. Brown analyst Gary Frazier. “The question now is can they carry it off.”