Matria's Health a Matter of Contention

Ready for Takeoff

On Monday, with Matria sitting at $37 a share, Avondale Partners analyst Brooks O'Neil urged investors to buy the stock before it takes off again.

Matria has just announced "a series of contract signings, renewals and expansions that, collectively, represent by far the largest batch of new awards in many years," O'Neil explained. "We suspect this is the start of a string of positive news from the company that will carry these shares to new highs and would encourage investors to buy the stock now in anticipation of what could be a quick and powerful move."

O'Neil pointed to the company's first-quarter earnings release, slated for Friday, as a possible near-term catalyst. Analysts are looking for Matria to report sales of $80.6 million and earnings of 16 cents per share for the period. O'Neil expects the company to hit Wall Street's target -- without any real synergies from its recent acquisition -- and then ramp up its performance as the year goes on.

All told, O'Neil predicts that Matria will grow profits by a whopping 450% in 2006 and then another 55% on top of that in 2007.

O'Neil has made two major assumptions, however. He believes that Matria will pull off its biggest acquisition ever with great success. Meanwhile, he expects the company to divest its Facet device business -- perhaps in a matter of weeks -- and its European dialysis unit without any real hitches.

Most analysts share O'Neil's optimistic view. At least one, however, has expressed a little more caution.

CFO Woes

Stifel Nicolaus analyst Thomas Carroll stopped recommending Matria's stock the day after Mengert resigned and recent HealthSouth finance executive Jeffrey Hinton stepped up to fill his shoes.

"In our view, the near-term risk of operational problems from the integration of CorSolutions and pending sale of Facets/foreign diabetes is significantly higher without Steve Mengert," Carroll wrote last month when reiterating his hold recommendation on Matria's stock. "Jeff Hinton, with a superior professional background, will have his hands quite full over the next three to six months -- even without the business changes at hand within Matria."