Maryland stocks punished for lowered outlooks

Daily Record, The (Baltimore), Aug 16, 2004 by Kathleen Johnston Jarboe

It was a week of stunning losses for some Maryland companies as at least 10 stocks posted double-digit losses.

Investors await delayed earnings news tomorrow from prosthetic limb specialist Hanger Orthopedic Group Inc.

Stock in the Bethesda-based business lost 53.7 percent last week after the company said it would postpone second-quarter earnings by a week. It also warned in a regulatory filing its income would fall well below estimates. Shares closed at $4.42 on Friday.

Investors had largely ignored the earnings delay at Hanger. But when the company said second-quarter pretax income would only be about $2.5 million, compared to $15.8 million in last year's comparable quarter, the stock plunged.

I described it as a bombshell, said analyst Michael J. Petusky of Thompson, Davis, & Co. in Winston-Salem, N.C. He had estimated Hanger would bring in $13.4 million in pretax revenue for the quarter.

Stocks traded at nearly 10 times normal volumes last Wednesday as more than 3 million shares traded hands once knowledge of the filing spread.

It's a substantial earnings miss, and the stock was sold off as a result, Petusky said.

Hanger wasn't the only Maryland stock caught in a storm.

Shares in cancer screener Digene Corp. dropped 25.8 percent last week after the company said research and marketing costs would drive down 2005 profits.

The guidance was part of the Bethesda-based company's fourth- quarter report that missed analysts' estimates by 1 cent, according to an analyst polling by Bloomberg.

The stock did what it did not on the quarter but on the outlook, said analyst Bruce Cranna of Leerink Swann in Boston. They're talking about a 30 percent reduction in net income.

Still, shares that dropped as much as 34.2 percent in heavy trading last Thursday began to recover some Friday. The stock closed up 11.5 percent by the end of that day to finish at $23.50 for the week.

We think it was an overreaction, Cranna said.

Other stocks posting double-digit losses during the week included Tessco Technologies Inc., which dropped 21.2 percent to close at $11.75, Ciena Corp., which lost 16.6 percent to end at $1.71, and Medifast Inc., among others, which declined 11.6 percent to close at $3.05.

The losses helped push the Bloomberg Maryland Index below performances by broader indexes for the week. The Free State index of 91 stocks lost 1.2 percent while the Nasdaq Composite only lost 1 percent and the Dow Jones Industrial Average climbed 0.1 percent.