SVE for a possible bounce tomorrow
Service Experts Issues Earnings Warning, Weighs Sale (Update3) (Updates with closing share price in 2nd paragraph.)
Nashville, Tennessee, July 19 (Bloomberg) -- Service Experts Inc., an air conditioning and furnace installer, warned second- quarter earnings could be less than half as much as analysts expected and said it's considering a sale or merger.
Shares of the Nashville, Tennessee-based company fell 7 5/8, or 37 percent, to 12 7/8. They have lost 65 percent of their value in the last year.
The company sees earnings of 23 cents to 28 cents a share, less than the 50-cent average estimate of analysts polled by First Call Corp. Service Experts said it's had preliminary talks with some potential buyers and it asked SunTrust Equitable Securities Corp. and Wasserstein, Perella & Co. to explore its options.
Service Experts blamed its light commercial service business, weather-related discounting in its residential business, and falling revenue and higher expenses as it combined hubs in Dallas, San Francisco and southern California. ''They've had a lot of problems with weather and competitive pressures, as well as restructuring foul-ups that cost a lot more in earnings than anyone expected,'' said R. Douglas Moffat, a Robinson-Humphrey analyst, who downgraded his rating this morning to ''long-term buy.''
Assessing Weakness
Alan Sielbeck, Service Experts' chief executive, cautioned that the company is still assessing the impact of weakness in its light commercial market, which accounts for about 30 percent of its business and it may see more of the same weakness in third quarter. Service Experts had revenue of $407.8 million in 1998. ''We did not execute the strategy well in combining certain centers,'' he said of the hub consolidations, adding that no more are planned.
The company also said it's in the process of lowering its fiscal 1999 earnings expectations. It plans to release its quarterly report Aug. 3.
Service Experts said it's possible no transaction will result from the continuing discussions. While Sielbeck wouldn't comment further on the sale talks, Moffat said that even with earnings problems in the first, second and possibly third quarter this year, the company is still a good buy. ''There's nobody larger in (the South). If you want to be in that spot, it would be quite a prize,'' he said.
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