Fun with Figures: 1Q/2010 EPSDear Doktor: I have learned that making forecasts supported by calculations is not very popular on bull boards. The highly-rated posts tend to be short and snappy. However, here goes:
Please see my post on May 23, 2009 called "Steady-State EPS Forecast". It was a bottoms-up build of the profit. Long-run, I still think it is valid. It says they can make EPS of between
.50 and $1.00 if they operate at capacity with in-network contracts. The assumptions are all there in detail.
I did a quick estimate today based on 3Q/2009 reported earnings and I come up with them doing
.06 per share in 1Q/2010 if one-third of the business from the non-paying insurance company returns in 1Q/2010. If all the business returns after being dormant for 1 year, they could do
.10 per share for the quarter.
Here are my assumptions for that top-level calculation:
3Q/2009 operating earnings of $1.5 million. Deduct prior period revenue adjustment of $1.3 million (unlikely to be repeated). Add back
.5 million of temporary high rate of spending on General & Admin (lawyers, investment bankers) to get back to the more normal 2008 run rate. This gives normalized operating earnings of
.7 million for the quarter just completed.
Now add in business from the non-paying insurance company. They wrote off half a year's business from A/R of $5 million. So the insurance company was doing $10 million per year at out-of-network rates. Let's say this becomes $7 million per year at in-network rates. Assume spending on nurses doesn't go up much (didn't lay them all off) and drug costs are not that much, then a lot of this falls straight to the bottom line.
Now deduct 35% non-controlling interest. Assume taxes are zero because of tax recoveries for prior losses. This gives you 6 cents per share for the quarter in 1Q/2010 if 1/3 of the business returns, and 10 cents if it all returns.
I think they will wait until after announcing 1Q/2010 EPS before they announce they are resuming the dividend. It is prudent to be sure the business is back on a profitable footing before promising dividends. I think they will resume with 2 cents per month and later in the year increase it to 3 cents per month.