Needham downgraded Matria Healthcare (MATR ) to buy from strong buy.
Analyst Dalton Chandler says the company expects Q4 revenue to be up a bit from his $68.6 million estimate, but expects EPS to be below his $0.29 estimate. Chandler notes the EPS shortfall is due to the company's spending to build out disease management capabilities ahead of finalizing related contracts, and a shift in the mix toward disease management away from women's healthcare, which currently has higher margins. Chandler upped his $294.4 million 2002 revenue estimate to $300 million, but cut the $1.79 2002 EPS estimate to $1.55, and trimmed the $44 target to $37 in step with guidance. Despite the near-term setback, Chandler thinks the fundamental story remains intact.