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LifePoint's Vital Signs Fall

W.D. Crotty
January 10, 2006

An aging U.S. population may bode well for health-care stocks in the future, but hospital operator LifePoint (Nasdaq: LPNT  ) is down 20% today. The company lowered earnings estimates for the just-completed fourth quarter and said that analyst estimates for 2006 are too high. Is this a value opportunity, or a well-deserved markdown?

The company originally forecast earnings for Q4 2005 between $0.61 and $0.65 per share. Now the company says that lower volumes, start-up costs, slow ramp-ups for new hospitals, bad debt, physicians, and a difficult state and federal reimbursement environment have combined to clobber its earlier estimate. After listening to the conference call, this observer wondered what, exactly, was going right.

LifePoint also trimmed back 2006 expectations. The 18 analysts who follow the company had projected earnings of $2.70 to $3.01 for this year. Surprise! The company expects to see earnings of $2.18 to $2.35 a share instead. LifePoint did say that its projections did not include hospitals it expects to acquire this quarter from