PacifiCare Details Poor 2nd Quarter

Managed health-care giant PacifiCare Health Systems Inc. disappointed investors for the second time this week, saying Friday that it will post second-quarter earnings of between 30 and 45 cents a share--less than half what analysts had expected.

The Cypress-based company blamed unexpected increases in health-care costs in markets it inherited through its purchase of FHP International Corp. as well as in its own traditional markets.

The news surprised Wall Street analysts, who have held PacifiCare management in high regard for delivering consistently on their promising expectations. Analysts had expected the company to post earnings of $1.16 a share for the three-month period ending Monday.

PacifiCare Class A voting stock fell nearly 10%, or $6.50 a share, in Nasdaq trading Friday to close at a 52-week low of $59.375. The company’s widely held nonvoting Class B stock likewise slumped 9%, or $6.188 a share, to $62.875.

Earlier in the week, the stocks had taken an even worse drubbing after the company issued a terse warning that second-quarter earnings would be “substantially” below analysts’ estimates but didn’t provide specifics. The Class A shares dropped $17.25 to $63.75, while Class B stock fell $18.75 a share to $66.75.

In a conference call with analysts Friday, company management said FHP’s business had seriously deteriorated late last year. PacifiCare, which acquired its Orange County rival in February, said it discovered problems in claims processing, administrative controls and FHP’s contracts with doctors’ groups.