PRIMARY STOCK OFF COLOUR
SHARES in medical centre and pathology provider Primary Health Care have tumbled after the company cut its earnings forecast.
Primary shares plunged more than 10 per cent in early trade before recovering to close off 42c, or 8.1 per cent, at $4.77.
On Wednesday, after the share market had closed, Primary downgraded its underlying earnings estimate for the financial year just finished, to $400 million, from an earlier forecast of $410 million to $425 million.
Primary blamed the reduced earnings on a range of factors, including extreme weather and a relatively mild cold and flu season.
An analyst’s report from Macquarie Wealth Management said Primary’s earnings downgrade underlined the extent of the challenges inherent in its area of business, which was not reflected in its share price.
Macquarie said the Federal Government’s freeze on the Medicare Benefits Schedule — which sets the fees for GP visits and procedures — meant that instead of annual fees rising by about 2 per cent, prices would remain flat until 2018.
Macquarie said the last time that schedule fees were frozen, medical centre earnings grew only 0.8 per cent. “We believe this will place more pressure on Primary’s already modest rates of earnings growth,” the Macquarie report said.