Broker update:
Salomon Smith Barney - Oct. 7
Report notes that it is based on a more in-depth discussion with management -
Revising EPS, reiterates Buy Rating on weakness (1, strong buy, M, moderate risk, present price target $16) States that revisions are based on management's worst-case estimates after review of about 3000 managed-care contracts and large percentage of regional budgets.
Stresses that SSB believes estimates represent highly conservative view - possible surprises on upside - Believes stock has more than discounted both near and long-term risks to earnings.
98 3Q - .27 versus .30 (hurricane Georges)
98 4Q - .27 versus .31
98 - 1.09 versus 1.16
** 100 mil 1-time charge related to write-off of Horizon home hlth care business in 98 Q3
99 - 1.09 versus 1.30 (.25, .27, .28, .29)
2000 - 1.25 (without management input)
After initial impact of pricing pressures, SSB assumes growth at 15% per annum. Believe company is fundamentally strong, positive cash flows, strong balance sheet. Believe few, if any, further EPS risks for 1999, with poteneial for upside. Believe competitors who may be using "inappropriate pricing strategies" to gain market share
are likely to return to "more rational pricing levels" after reaping consequences, and that HRC's "market dominance and high quality services will allow for resumption of pricing stability". Believes management will quickly adjust to changing environment and again deliver strong results. |
