CONFERENCE CALLS
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FOOL PLATE SPECIAL
HMOs Upgraded
Cowen & Co. took the time this morning to upgrade the entire healthcare maintenance organization (HMO) group this morning, saying it was "ready for a bounce." Hopefully this contrarian move will work out better than the firm's high-profile upgrade of MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> a few weeks ago that left egg dripping from the trading firm's collective face. However, the upgrade of health maintenence organizations on a valuation basis is not all that extreme a thought, given accelerating industry trends towards consolidation. Although I don't want to pretend to know Cowen's mind, valuations among the HMOs have crossed more than a few Fools' furrowed brows in the past several weeks.
Earnings have been bad lately out of the HMOs as heavy competition led many of the more stable growers to price their coverage too low, resulting in the nasty series of eanrings disappointments we have seen accelerate through this year. Right now many of these firms have written off growth in 1996 and are looking toward the January 1997 renewal phase to reintroduce profitable, but competitive, pricing. Pricing is not the only story in the HMO group; with the market saturation increasing, many of these companies will only be able to consistently increase their earnings over the next few years through acquisitions.
Thus it is logical to assume that the urge to merge that has dominated the sector will actually accelerate as the prices of many of these companies have started to come down. If AETNA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AET)") else Response.Write("(NYSE: AET)") end if %> thought it got a fair price on US HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USHC)") else Response.Write("(NASDAQ: USHC)") end if %>, a lot of the current prices we are seeing are a steal -- something confirmed yesterday when PACIFICARE HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PHSYA)") else Response.Write("(NASDAQ: PHSYA)") end if %> purchased FHP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FHPC)") else Response.Write("(NASDAQ: FHPC)") end if %> for $2.1 billion. The merger made sense for Pacificare for two reasons: it extended the company into nine new regions, penetrating a number of niche markets, and it was done at the company's 52-week high. If the deal had been cut a few months back when FHP was at $35, the premium would have driven the cost of the acquisition much higher.
HMO names to watch? Aetna, Pacificare, UNITED HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %>, HEALTHSOUTH CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRC)") else Response.Write("(NYSE: HRC)") end if %>, HEALTHSOURCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HS)") else Response.Write("(NYSE: HS)") end if %>, FOUNDATION HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FH)") else Response.Write("(NYSE: FH)") end if %>, VALUE HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VH)") else Response.Write("(NYSE: VH)") end if %>, MID-ATLANTIC MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MME)") else Response.Write("(NYSE: MME)") end if %>, OXFORD HEALTH PLANS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OXHP)") else Response.Write("(NYSE: OXHP)") end if %>, RIGHTCHOICE MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIT)") else Response.Write("(NYSE: RIT)") end if %> and SIERRA HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SIE)") else Response.Write("(NYSE: SIE)") end if %>. The hospital systems like COLUMBIA/HCA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %>, HEALTH SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HQ)") else Response.Write("(NYSE: HQ)") end if %> and ORNDA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ORN)") else Response.Write("(NYSE: ORN)") end if %> also might become acquirers or acquirees, depending on their size.
ICTS HOLLAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ICTSF)") else Response.Write("(NASDAQ: ICTSF)") end if %> popped up $1 1/2 to $11 5/8 this morning after Brian Finnerty of Unterberg Harris made positive comments about the company on CNBC's Squawk Box -- an airport security training firm that Unterberg helped bring public.
EMCARE HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMCR)") else Response.Write("(NYSE: EMCR)") end if %> drove ahead $1 3/4 to $22 1/4 today after reporting decent quarterly results and confirming it would not go ahead with a 1.8 million secondary offering that would have diluted shares by more than 25%.
MEN'S WEARHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUIT)") else Response.Write("(NASDAQ: SUIT)") end if %> moved up $3/4 to $20 today after the stock was upgraded to "buy" from "attractive" by Bear Stearns.
Restaurant franchiser APPLEBEE'S INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: APPB)") else Response.Write("(NASDAQ: APPB)") end if %> peeled ahead $1 7/8 to $29 3/8 after beating estimates for its second quarter earnings by one cent, posting $0.31 per share.
US LONG DISTANCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USLD)") else Response.Write("(NASDAQ: USLD)") end if %> rang up a $1 3/8 to $5 3/4 gain today, following an Interstate/Johnson upgrade from "neutral" to "buy."
SUNQUEST INFORMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUNQ)") else Response.Write("(NASDAQ: SUNQ)") end if %> shares surged $1 5/8 to $14 1/4 after the company posted earnings of $0.15 per share for its second quarter, roughly 9 cents ahead of estimates.
A $0.40-per-share loss at A+ NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACOM)") else Response.Write("(NASDAQ: ACOM)") end if %> was enough to earn the stock a $1 1/4 to $8 3/4 drubbing today. Consensus estimates were not available for the networking concern. PC DOCS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DOCSF)") else Response.Write("(NASDAQ: DOCSF)") end if %> also slumped after reporting earnings, down $1 1/4 to $16, without any estimates available as well.
KLM ROYAL DUTCH AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KLM)") else Response.Write("(NYSE: KLM)") end if %> slipped after the firm posted its first quarter results, dropping $2 1/8 to $30 5/8. The numbers were worse than expected and many speculate that analysts will be cutting their 1996 and 1997 estimates as a result.
If watch-maker FOSSIL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FOSL)") else Response.Write("(NASDAQ: FOSL)") end if %> doesn't stop disappointing earnings expectations soon, the stock is going to be at zero before long. Shares wound down $2 to $9 1/8 after the company reported $0.19 EPS, four cents below consensus expectations.
HYAL PHARMACEUTICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HYALF)") else Response.Write("(NASDAQ: HYALF)") end if %> plunged $2 3/8 to $5 1/8 after it announced that preliminary statistical resuls for its Hyanalgese-D topical gel that were not as positive as investors were hoping.
The shares of WALLACE COMPUTER SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WCS)") else Response.Write("(NYSE: WCS)") end if %> tumbled $4 3/8 to $26 today after MOORE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCL)") else Response.Write("(NYSE: MCL)") end if %> announced that it would not proceed with its proposed $60-per-share offer for the company.
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUNW)") else Response.Write("(NASDAQ: SUNW)") end if %> dropped $2 9/16 to $53 1/16 this morning after Donaldson, Lufkin & Jenrette downgraded the shares from "market perform" to "underperform."
Hype about Internet payment and transactions is just not what it used to be. CYBERCASH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYCH)") else Response.Write("(NASDAQ: CYCH)") end if %> dropped $3 1/4 to $32 3/4 after posting a much-wider-than-expected loss.
HORMEL FOODS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRL)") else Response.Write("(NYSE: HRL)") end if %> found itself in a stew today, dropping $1 3/4 to $20 after warning that it expects to disappoint the Street with its third quarter earnings. Apparently, hogs and hog chow cost more than they used to.
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Randy Befumo (MF Templar), a Fool
Selena Maranjian (MF Selena) another Fool
Prem Kumar (MF Prem) another
Fool