SVE for a bounce tomorrow.
Service Experts Shares Fall; 1999 Earnings Seen Below Estimates
Nashville, Tennessee, Feb. 23 (Bloomberg) -- Service Experts Inc. shares fell 29 percent after the provider of heating and air conditioning services said 1999 earnings will be below analysts' estimates, partly because of warm weather at the beginning of the year.
Service Experts, which had sales of $407.8 million in 1998, fell 5 11/16 to 14 in trading of 2.77 million shares, about 42 times its three-month daily average.
Brentwood, Tennesssee-based Service Experts said it expects net income of $1.65 to $1.70 a share for 1999 because of warm weather in the first quarter. The company was expected to have net income of $1.77 a share, based on the average estimate of analysts surveyed by First Call Corp. An increase in the amount the company plans to spend on standardizing its service centers was also a factor in the warning, said Alan R. Sielbeck, chairman, president and chief executive. ''Since about 75 percent of their business is residential service, a fair part of their revenues are weather sensitive,'' said analyst Joseph Sroka of ABN Amro. ''The company is making strides in its commercial services operations, which are less weather sensitive, and interest in selling additional services like indoor air quality.'' Sroka, who said he doesn't plan to change his ''buy'' rating on Service Experts because of the warning, is reducing his estimate for 1999 earnings to $1.66 a share from $1.76.
Milder temperatures usually decrease the number of service calls the company makes, because equipment fails more often during extreme temperatures, Sielbeck said. Mild temperatures also cause Service Experts to move from its primary business of residential service to doing work for small businesses, which typically generates a lower profit margin, Sielbeck said.
Service Experts, which installs and maintains central air conditioners and furnaces, plans to increase its spending on training employees and standardizing practices throughout its centers, Sielbeck said. The company's also speeding up conversion of its centers to a common software system. Service Experts has 104 service centers in 34 states.
The company also said it expects first-quarter net income to slightly exceed the 19 cents a share it reported in the year- earlier period.
Service Experts last year acquired 43 service centers and 63 smaller operations with about $170 million in annual revenue. Sielbeck said he expects the company to ''continue that pace.''
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