Goldman Sachs upgraded PacifiCare Health (PHSY) to outperform from market perform.
Analyst Charles Boorady says the upgrade is based on a reduction of debt-financing risk, which he sees as the biggest near-term risk to equity holders. He says refinancing is a positive signal regarding the company's fundamentals, as lenders have inside information ahead of first quarter earnings per share, which are to be reported on May 1.
Boorady believes the company also benefits from very strong industry pricing, and an expected deceleration in the rate of medical cost increases. He raised his 2002 earnings per share estimate by $0.45 to $3.60, and upped the 2003 estimate by $0.80 to $3.95. Boorady set a $32 target.