Newspaper article The Florida Times Union

Bad News Sparks PSS Stock Dive

Newspaper article The Florida Times Union

Bad News Sparks PSS Stock Dive

Article excerpt

PSS World Medical Inc.'s stock plunged in extremely heavy

trading yesterday after the company, for the second straight

year, said merger adjustments would reduce its fourth-quarter

earnings below analysts' expectations.

PSS said late Friday that earnings for fiscal 1998, which ended

April 3, will be about 30 percent higher than fiscal 1997 but

will be 4 cents a share below analysts' expectations, mainly

because of accounting adjustments related to its $685 million

purchase of Gulf South Medical Supply Inc.

And while it expects fiscal 1999 earnings to be 30 percent

higher than fiscal 1998, the company projects those earnings to

be 14 percent below analysts' projections.

Even though the Jacksonville-based medical supply company

projects big increases in earnings over those two years, Wall

Street sent a clear message yesterday that it doesn't like

surprises. PSS's stock dropped as much as 6 points and closed at

14 7/16, down 4 15/16 for the day.

Trading volume was 13,955,900 shares, compared with a normal

recent daily volume of about 360,000 shares.

"For a company to miss two quarters in five is a pretty

dramatic result," said Christopher D. McFadden, an analyst at

Wheat First Union in Richmond, Va. "The street is just not very

patient with these types of things."

Two other analysts lowered their investment ratings on PSS

yesterday. BT Alex. Brown analyst Barbara Ryan lowered her

rating from "strong buy" to "market perform" and Salomon Smith

Barney analyst Lawrence C. Marsh lowered his rating from "buy"

to "outperform."

Friday's announcement came almost exactly a year after PSS said

one-time merger costs would cause a fourth-quarter loss in

fiscal 1997. Its stock opened 5 3/4 points lower that day.

PSS Chief Financial Officer David A. Smith said last year's

disappointment is not related to this year's. The lower earnings

will be due in part to increased and accelerated expenditures on

Gulf South's infrastructure to support integration and future

growth. …

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