Psychiatric Solutions skids on 3Q results, outlook

Psychiatric Solutions down 25 percent as slow revenue growth hits profit, company cut guidance

• On 1:42 pm EDT, Wednesday October 28, 2009

NEW YORK (AP) -- Shares of Psychiatric Solutions Inc. plunged Wednesday after the behavioral hospital operator reported disappointing results for the third quarter and cut its expectations for the rest of 2009.

Shares of the Franklin, Tenn., company dropped $6.10, or 25 percent, to $18.04 in afternoon trading. Psychiatric Solutions said its profit did not live up to its own goals because revenue per patient per day did not grow as much as expected, and profits at its management-contract segment did not meet its forecasts.

In a note to clients, Raymond James analyst John Ransom downgraded the stock to "market perform" from "strong buy." He said tight state budgets and uncertainty about future profits will pressure Psychiatric Solutions' stock over the next few months.

Deutsche Bank analyst Darren Lehrich said the company performed more charity care in some markets, which hurt its profit. He added that patients stayed for less time than in the year-ago quarter.

"We believe expectations were low coming into the third quarter, but this result will be disappointing given Psychiatric Solution's earnings volatility throughout this year," he said.

Psychiatric Solution reported third-quarter net income attributable to its stockholders of $28.2 million, or 50 cents per share, on revenue of $455.3 million. Analysts surveyed by Thomson Reuters had expected profit of 56 cents per share on revenue of $462.2 million.

The company now expects to earn $2.11 to $2.14 per share this year, excluding any acquisition costs. Psychiatric Solutions previously forecast $2.16 to $2.24 per share in profit, and analysts were expecting $2.16 per share.

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