Amerigroup Tries to Regroup

Diversified managed care players remain healthy investments despite the woes of their Medicaid-only peers.

That's the view offered by Wall Street analysts, anyway, after Amerigroup (AGP Quote) this week issued a profit warning that sent its stock plummeting by more than 40%.

For investors in Amerigroup -- and even competing Medicaid insurers such as Centene (CNC Quote) and Molina (MOH Quote) -- the news couldn't get much worse. Amerigroup now expects to report a third-quarter loss instead of the 48-cent profit that analysts had anticipated. Much of the shortfall stems from a spike in care for sick newborns and those seeking outpatient services. But more than half of it comes from medical costs that wound up underreported in the first half of the year.

Thus, Amerigroup earned even less than Wall Street expected when the company posted disappointing quarterly results last time around. By now, some believe, management has suffered lasting damage as a result. ...