The market pounded

El Paso

(EP)

Friday for a possible earnings shortfall.

Shares of El Paso tumbled more than 18% after UBS Warburg lowered its earnings guidance and target price for the company. Citing turmoil in the merchant energy sector, UBS said it now expects El Paso to fall up to 25 cents shy of management's 2002 earnings guidance of $2.05 to $2.15 a share. UBS predicts that El Paso will fall similarly short of earnings targets in 2003.

As a result of these lower projections, UBS cut El Paso's 12-month price target from $21 to $19 a share.

"Though we believe EP shares are significantly undervalued at current levels, we believe the present state of the industry will likely yield continued volatility," UBS wrote Friday. "Investors should be cognizant of this reality when making a near-term investment in EP."

The market reacted swiftly, whacking $2.32 off of El Paso's share price and pushing it closer to summer's single-digit lows. The stock closed Friday at $11.67, down nearly 80% from the boom times that preceded Enron's collapse.

El Paso's latest freefall overshadowed even that weathered by

Duke

(DUK) - Get Report

, which tumbled 4.76% to $20.24 after issuing its own earnings warning Friday. El Paso's one-day percentage loss was more than triple Duke's, even though El Paso itself has not lowered guidance.

Some predicted more bad news to come.

"It's always something," one industry critic said. "So you have to wonder what tomorrow's going to bring."