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Lehman Downgrades First Health to 'Underweight'


Lehman Brothers downgraded First Health Group (FHCC) to underweight from equal-weight.

Analyst Joshua Raskin says the company tends to underperform in periods of strength in the managed care industry, and lag operationally in strong periods for HMOs. Raskin says First Health would be hurt by any moderation in hospital costs. He believes the company may seek additional acquisitions, which would add to integration risks.

Raskin notes a slowdown in organic growth, and an increase in competition for preferred provider organizations services to group clients. He says he's seen instances of insider selling in the past year. Raskin cut the $1.50 2002 earnings per share estimate to $1.26; he sees $1.50 for 2003. He also cut his $30 target to $27.


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