Advocat Clawed on Forecast

Shares are in tatters after a breakeven 2007 outlook.
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Advocat (AVCA) plunged 28% Friday on a weak 2007 forecast.

The Brentwood, Tenn., rehabilitation center operator said it expects revenue to rise to a range of $221 million to $228 million from the year-ago $217 million. But earnings will fall to a level around break-even from the year-ago $22 million, or $3.35 a share.

Advocat said it expects a poor bottom-line performance because "projected increases in reimbursement rates are insufficient to offset projected increases in rent expense (including cash and noncash rent) and operating costs, including market-driven increases in employee salaries and benefits costs."

Advocat also expects its professional liability expense to swing to $9.3 million from a benefit of $4.8 million in 2006, due to last year's favorable resolution of claims and corresponding adjustments to the accruals.

Shares plunged $4.78 to $12.22.