CardioNet skids after paring outlooks through 2011

NEW YORK - CardioNet Inc. stock plunged Wednesday after the heart monitor maker lowered its expectations for 2009, and pulled back from a forecast for continued growth over the next two years.

The company said reimbursements from commercial health plans have not been as strong as expected, and while demand for its wireless monitoring devices is growing, it isn't growing at the levels CardioNet anticipated. CardioNet halved its 2009 profit guidance, cut its revenue estimate, and withdrew its guidance for 2010 and 2011.

In afternoon trading, the stock tumbled $6.59, or 40.4 percent, to $9.73. Earlier it fell to a low of $9.51, the lowest price for CardioNet shares since they started trading in March 2008. About 17 million shares changed hands at midday, compared with an average full-day trading volume of 760,000 shares.

The Conshohocken, Pa., company now calls for a profit of 30 cents to 35 cents per share and $156 million to $160 million in revenue this year, down from an earlier outlook for 69 cents to 73 cents per share in profit, and revenue between $170 million and $175 million. The forecast implies sales growth of 30 to 35 percent.

CardioNet had said its profit would double in 2010, with revenue rising by 50 percent. It expected a profit of $2 per share in 2011, but now says it is not able to give forecasts for those two years.

According to Thomson Reuters, analysts were expecting a profit of 66 cents per share in 2009, $1.25 per share in 2010 and $1.85 per share in 2011.

Thomas Weisel Partners analyst Steven Halper said he was not surprised, but thought the company faced a greater risk from Medicare reimbursement rates, rather than from commercial rates. CardioNet's expectations were too high, he said. While he believes the company has strong growth potential, he believes CardioNet may struggle to realize that potential.

CardioNet's profit is linked to the rates the company is paid by health management organizations, who cover part of the cost for the implantation of its devices.

Halper reiterated a "Market Weight" rating on the stock, but Roth Capital Partners analyst Matt Dolan downgraded the shares to "Hold" from "Buy."

"We find its expected reimbursement levels to be too unpredictable to provide a clear overall revenue and earnings per share picture over the next couple of years, leaving little upside for the stock in the near-term," he wrote. He said CardioNet's patient growth is still significant, and the company is addressing an unmet medical need.

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