Shares of Magellan Health Services Inc. (Nasdaq:MGLN) slid Tuesday morning after the company issued a forecast for 2014 earnings that fell well below average expectations on Wall Street.
The manager of behavioral health, radiology and pharmacy benefits said it expects 2014 earnings to range between $2 and $2.56 per share on revenue of $3.61 billion to $3.80 billion. Analysts expected, on average, earnings of $3.27 per share and revenue of $3.41 billion in revenue, according to a poll by FactSet.
Magellan’s forecast, however, includes the impact of stock buybacks to date and a tax imposed as part of the Patient Protection and Affordable Care Act (PPACA), the federal law that aims to provide coverage for millions of uninsured people. Analysts typically exclude one-time items from their estimates.
Jefferies analyst David Styblo said in a research note that the midpoint of Magellan’s forecast — $2.28 per share — falls 30 percent below his expectation, which matches the Wall Street average.
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“Lower segment profit accounts for some of the miss,” he wrote, but added that most of the miss is still unexplained.