HMS Holdings Corp.'s shares plunged Thursday after the healthcare benefits coordinator lowered its guidance.
THE SPARK: HMS announced after the market closed Wednesday that it is lowering its 2012 earnings and sales guidance due to ongoing issues with its Medicaid programs.
The company now expects to earn 55 to 60 cents per share for the year, down from its prior forecast of 58 to 64 cents per share. It dropped its annual revenue forecast to $480 million to $490 million, from a prior range of $500 million to $515 million.
Analysts polled by FactSet were expecting the company to earn 58 cents per share on revenue of $493.5 million for the year.
HMS also issued its 2013 revenue forecast and announced that it has won the largest contract in its history, which is valued at as much as $297 million over five years if it meets all the performance incentives.
THE BIG PICTURE: HMS, based in New York, coordinates benefits and performs billing audits for state-run and commercial health programs.
THE ANALYSIS: William Blair analyst Ryan Daniels acknowledged that 2012 has been a "noisy" year for the company, given that it has cut its guidance twice and posted slower-than-expected core growth.
However, he maintained an "Outperform" rating on the company's shares and said shareholders must have a tolerance for some near-term volatility.
"We continue to see HMS as one of the best growth stories in the healthcare information technology space," Daniels said in a research note.
SHARE ACTION: Shares fell $3.97, or more than 12 percent, to $28.27 in afternoon trading. Its shares are at the low end of its 52-week trading range of $22.45 to $37.19.