The company, which manages the treatment of long-term illnesses, punished investors Thursday with its second weak forecast in two months. The company slashed its aggressive full-year targets, sending shares down 18%.
Matria maintained its
recently lowered second-quarter forecast, but cut full-year revenue guidance to between $337 million and $341 million. Wall Street analysts had been banking on revenue of $361 million. Matria's new full-year profit target of $1.10 to $1.17 share looks to come in at the low end of Wall Street expectations even before stock-option expenses have been subtracted.
Matria blamed a big recent acquisition.
"The market's reaction to our acquisition of CorSolutions appears to be a general delay in awarding new-employer business to Matria," explained CEO Pete Petit. "Because our acquisition of CorSolutions is currently the largest transaction of this nature to occur in the disease-management market, consultants and prospective clients are being cautious. ... We believe this market pause is temporary,
and the metrics upon which we acquired CorSolutions are still very compelling."
Mainstream analysts originally embraced that acquisition, issuing bullish reports that sent the company's stock rocketing to an all-time peak in February of $45 a share. But
short-sellers soon pounced on the stock and triggered a big selloff. The stock now fetches less than it did before the acquisition and, in fact, sits at a new 52-week low.
Thus, those who believed in management -- which pointedly dismissed a negative report by Off Wall Street three months ago -- have paid dearly for their faith.
"I have been around Wall Street 25 years," BI Research analyst Tom Bishop boasted in a March conference call that Matria held in response to Off Wall Street's first report. "If I had to side with you or Off Wall Street, I think I would side with you."
Meanwhile, some of the very risks that Off Wall Street warned about -- including acquisition-related challenges -- have come home to roost.
Piper Jaffray analyst Sean Wieland finally cooled on Matria, cutting the stock to market perform on Thursday after the company's dismal forecast. Meanwhile, a bullish report from a competing analyst started to look especially ill-timed.
Avondale analyst Brooks O'Neil reiterated his outperform rating on Matria just hours before the company warned of a shortfall. O'Neil had been hoping for some good news from the company.
That said, O'Neil rattled off a series of reasons to avoid the stock right now. He portrayed Matria as a volatile stock, vulnerable to near-term hits, and portrayed it as a long-term investment only.
He even hinted at a second-quarter miss, while forecasting better times ahead.
"If you are an investor who cares (about guidance) and you still own MATR shares, you are probably someone who enjoys going to the casino with a pair of dice and playing craps," O'Neil wrote on Wednesday. "It is a game with which we are unfamiliar and would never think of playing.
So you are on your own."
He went on to offer some cautious words about the company's leadership as well.
"Petit is who he is, and we love him for it," O'Neil stated. "Those who don't love him should simply move on. Expecting him to become a kinder, gentler Pete is virtually out of the question. So is expecting him to consistently hit the forecasts he makes."
If anything, O'Neil's report seemed to do more harm than good. Matria's stock slipped nearly 4% on Wednesday, even before the company issued its warning later on that night. Before that update, virtually every mainstream analyst on Wall Street had been recommending the stock.
O'Neil simply happened to recommend it last.
"If you are a half-empty short-term or 'expectations-driven' investor, we would suggest it is impossible to know whether MATR can pull (its current goals) off in the next few weeks and would suggest you avoid these shares until there is more visibility," he wrote. "On the other hand, if you are a half-full, long-term (investor), or focus more on the 'reality' of the company's accomplishments than on how the same stack up relative to 'expectations,' we'd suggest the risk/reward here is incredibly compelling."
O'Neil has a $50 price target on the stock. After Thursday's plunge, however, the stock is sitting much closer to the $22 target that short-sellers established some three months ago.