Buzz Stock of the Day – Providence Service Corp. (PRSC)

Posted on Monday, April 20th, 2009

The Providence Service Corp. (Nasdaq: PRSC) stated today that it expects first quarter earnings per share of at least $0.35, a dime higher than the First Call consensus of $0.25. The social services management company stated it expects revenue or between $180 million and $185 million, higher than the $179.7 million analyst consensus.

Earlier this month, the Tuscon-based company announced that its Logisticare subsidiary won a $300 million contract from the New Jersey Department of Human Services to provide non-emergency transportation services for the fee-for-service in selected counties in New Jersey. The contract is expected to take effect on July 1, 2009, and has an initial term of three years with two, one-year renewal options that run through 2014.

Shortly before the contract was announced, SunTrust Robinson Humphrey analyst, Mark Hughes upgraded his rating on the stock to ‘buy,’ from ‘neutral. Hughes has a $12.00 price target on PRSC.

We like PRSC because the company generates cash from operations, has a small float and has year-over-year revenue growth of about 80 percent. The Providence Service Corp.’s 2008 revenue increased 143 percent to $691.7 million from $285.2 million a year earlier. Excluding a $169.9 million and an expense related to accelerated vesting, the company generated EBITDA of $39.1 million from $30.7 million a year earlier.

Shares of PRSC are up almost 500% since the onset of 2009.

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