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Biotech / Medical : PMCO - Promedco

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To: Joseph Strohsahl who wrote (59)	7/22/1998 10:24:00 AM
From: Joseph Strohsahl	Read Replies (1) of 106

TIME TO BUY: 7/21/98SECOND-QUARTER EPS OUTLOOKMIXED PERFORMANCE HEADLINE: Second quarter EPS results for the physician practice management industry should be mixed. Several companies should post respectable earnings improvement over last year's quarter, but some others are expected to report lower or lackluster results. The large cap companies are experiencing significant challenges (MedPartners and PhyCor) and the lack of visibility on earnings has hurt these stocks. We remain cautious on the group and hence selective on the group, with American Oncology Resources and ProMedCo rated "Attractive." PPM companies should begin reporting earnings this week, with PhyCor on July 23 and several companies announcing results the following week. Our estimates are generally in line with the Street for 2Q:98. American Oncology and ProMedCo should report earnings per share gains of 25% and 105%, respectively. Weexpect MedPartners to report a profit of $0.02 per share for the first time after two quarters of losses. PhyCor should report EPS of $0.22 but this is below 1Q:98 and up only 11% from last year. While the worst may be over, investors may want to see the companies generate consistent earnings before becoming optimistic on the group. KEY POINTS: 1. Out of our eight PPM companies, six should report positive earnings and two down.2. PHYC will report 2Q EPS this week, although lackluster results expected.3. American Oncology Resources and ProMedCo should both report robust earnings gains. ProMedCo: PMCO should report 2Q:98 EPS of $0.15 compared with $0.08 in 2Q:97. With recent acquisitions, the company should be able to make this number. We estimate same-store growth at 15%, one of the highest in the industry. The company's number of providers continues to soar and should increase to over 1,120 by the end of 2Q:98 from 192 at the company' IPO in 1997. Management might discuss on the conference call how the recent physician acquisitions in New York and Massachusetts are proceeding. *PaineWebber Incorporated makes a market in this security.

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