J.P. Morgan Lowers Pediatrix to 'Underweight'

Analyst Matt Ripperger says Pediatrix's stock will likely underperform until an inquiry into its billing practices is complete

J.P. Morgan downgraded Pediatrix Medical (PDX ) to underweight.

The U.S. Attorney General is investigating the company's billing practices, and the Federal Trade Commission is looking into Pediatrix's merger with Magella Healthcare. Analyst Matt Ripperger says Pediatrix will likely underperform small/mid-cap healthcare services stocks until these inquiries are completed. He notes the current billing probe is nationwide, not state-specific, as in past cases, indicating the Attorney General continues to have issue with Pediatrix's business model.

Ripperger sees a fundamental risk; that physicians may become too conservative in their billing in response to this investigation. He sees 77 cents second-quarter earnings per share, $3.25 for 2003, and $3.80 for 2004.

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