American Healthways shares jump 30% on profit gain

Disease management provider American Healthways’ (AMHC) shares are up more than 30 percent at midday to $15.85 after word of

Disease management provider American Healthways’ (AMHC) shares are up more than 30 percent at midday to $15.85 after word of a strong fourth quarter and year end.

For the fourth quarter, American Healthways earned $3.8 million on revenue of $38.3 million. That’s compared to net income of $1 million on revenue of $22.4 million in last year’s period. Earnings per share rose to 24 cents from seven cents in the year-ago quarter. Per-share estimates by analysts were 16 cents to 17 cents per share.

Roughly five cents of the per-share profit growth was attributable to health plan incentive bonuses, a signal that proves the company’s ability to meet and exceed expectations, said Chief Executive Tom Cigarran in a release. Being such a young industry, disease management and related businesses are striving to prove their worthiness to both investors and customers.

Also in the fourth quarter, the company says it produced a 90 percent growth rate in the average number of health plan lives under management. It expanded its relationship with BlueCross BlueShield of Massachusetts through a three-year diabetes contract, which means 15,000 new equivalent lives for the company as of Sept. 1, 2002. The company also picked up business in the PPO segment with its total equivalent lives under contract now at 50,000. While American Healthways increased its estimates for PPO business for the year, it reiterated its policy of not adding PPO lives to its backlog until health plan customers actually make contact with their employer customers. New PPO business has sprouted since the beginning of fiscal 2003. The company signed a contract for the PPO/ASO business belonging to The Principal Financial Group in which it will provide disease management programs to more than one million people participating in more than 270 self-funded employee benefit plans.

For the year, American Healthways’ revenue climbed from $75 million to $122.8 million while net income increased from $3.2 million to $10.4 million. Earnings per share for the year were 64 cents per share, compared to 22 cents in 2001.

Based on strong fourth quarter and yearend results, Cigarran increased projections for 2003 earnings per share to $1.01-$1.05 from $1.00-$1.04, between a 58 - 64 percent increase from last year. Earnings per share for the first quarter of the year are expected to be between 20 – 21 cents per share. As for revenues, the company is eyeing a 47 - 59 percent increase for next year, hoping to hit the $180 million - $195 million range.

Included in those projections are the company’s plans to invest in infrastructure and future programs, including its sixth enhancement center slated to open in during first quarter 2003 and two new call centers planned for the latter half of the year.

American Healthways remains debt free.