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.
“Lower segment profit accounts for some of the miss,” he wrote, but added that most of the miss is still unexplained.