Despite reporting record earnings for the last quarter of 1994, the stock of Mid Atlantic Medical Services Inc., Maryland's biggest HMO company, dropped more than 10 percent yesterday amid concern about heightened competition among managed-care providers.
Earnings for the fourth quarter were $15.63 million, or 33 cents a share, up from $11.1 million, or 25 cents a share, for the last quarter of 1993. Revenue was $199 million, up from $165 million.
Earnings for the year were $54.53 million, or $1.15 a share, compared with $24.83 million, or 55 cents a share, in 1993. Revenue totaled $750 million, a 16 percent increase.
The Rockville-based company also announced an increase of 10 percent, or 120,000 people, in membership since Jan. 1, reflecting strong enrollment gains in its health maintenance organizations and other managed-care plans.
Despite the apparent good news, "professional investors are largely fairly nervous about HMO stocks as a group," said Kurt Funderburg, an analyst with Ferris, Baker Watts Inc. in Baltimore.
"I think the perception is competition is heightening in that sector, that it's going to be harder to bring down medical costs as rapidly as they have been brought down in the last few years, and also that competition is going to bring down price increases to zero or maybe less," he added.
Mr. Funderburg also said that the company's earnings included an investment gain taken in the fourth quarter, which he estimated to be worth about 2 cents a share. Without that boost, he said, earnings would not have met analysts' expectations.
But another analyst, Robert M. Mains of First Albany Corp., said he was "fairly pleased with their numbers." He discounted the value of the investment gain, which resulted from a sale of stock in the company's investment portfolio.
"HMOs are to some degree able to manage their profits, and had those two cents in investment earnings not materialized in the quarter, I'm reasonably confident the company still could have reported 33 cents," Mr. Mains said.
Mid Atlantic's stock fell to $21.50 yesterday, down $2.50, on the New York Stock Exchange.
A Mid Atlantic spokesman discounted the drop in stock price, saying of the company, "All the fundamentals are still as sound as they ever were."
The analysts noted a positive sign for the stock's future -- the enrollment growth, which they said was surprisingly large.
Mid Atlantic subscribers now number 1.3 million, a 375,000 increase since the end of 1993.