Lehman Brothers upgraded its investment recommendation on shares of California-based HMO PacifiCare Health (PHSY) to buy from market perform.
Analyst Lawrence Marsh says Medicare givebacks to HMOs, set to be implemented on Mar. 1, could have a noticeable positive impact on PacifiCare's earnings per share. He believes these increases have the ability to boost the company's reported EPS over $2.00 on an annual basis. Marsh notes that the company was "a huge disappointment" in 2000, with EPS expectations of $8.00 for 2001 cut to $0.80 since October. He thinks results will fall "somewhere in the broad middle". The analyst raised his $2.00 EPS estimate for 2001 to $2.30, and sees $3.99 EPS in 2000. He also raised his $20 one-year price target to $35.