Beverly, Fairfield Experience Stock Value Declines

American Freightways Corp. isn’t the only Arkansas company struggling on Wall Street.

Beverly Enterprises Inc. of Fort Smith and Fairfield Communities Inc. of Little Rock both have experienced dramatic declines in value this year.

The value of stock in Beverly Enterprises dropped $5 a share last month after the long-term health care company announced that is being investigated by the federal government on allegations of misusing Medicare money. The company’s stock fell from a high of about $16 per share in May to a current price of about $9.50 a share. It is the first time the company’s stock has been below $10 a share in more than a year.

The federal Office of Inspector General is reviewing the company’s policies and procedures regarding Medicare funds being used to pay some labor costs. The lack of more information about the investigation has many investors worried.

“On the one hand, the investors are pleased with the way the company is being run,” says Jim Griffith, the company’s senior vice president for investor relations. “We had a very strong second quarter. It was the 10th consecutive quarter that we met or exceeded internal estimates and met or exceeded Wall Street’s expectations.

“However, the investors are concerned that they don’t have sufficient information, or as much as they’d like, on the scope or nature of this investigation.”

Griffith says the company can’t answer those questions. Government officials have told the company little about the investigation. Company officials don’t know how many of the company’s facilities are being investigated or how long the investigation will last.

“We don’t know anymore about this than what we’ve put out there,” he says. “It’s difficult for us to get a hand on it and put it behind us because we have no idea what caused it.”

The company’s stock seems to have stabilized to between $9 and $10 a share during the last two weeks.

Fairfield Communities also seems to be suffering from external factors not related to the company’s performance. The time-share industry just isn’t popular among investors right now.

Wall Street investors have become concerned about aggressive accounting procedures used by some time-share companies to calculate quarterly reports. Fairfield doesn’t use the accounting procedures that are being questioned by larger investors, but all of the companies in the industry are being affected.

“This is not unique to Fairfield,” says Dennis McAlpine, an analyst with Josephthal & Co. in New York. “Only one public company’s stock in this sector is doing better than Fairfield. They’ve all been down 40 to 50 percent.”

Since July 1, Fairfield’s stock has dropped from about $18 a share to about $10 a share. The price dropped $6 in one day on a volume of about 4 million shares. The company averages about 250,000 trades each day.

The same week that the stock was tumbling, Fairfield released a quarterly report showing earnings of 28 cents a share, a 22 percent increase over the previous quarter and about what analysts were predicting.

“Fairfield is the quality of the group, there’s no doubt about it,” McAlpine says. “They were right on the money with earnings.”

Most analysts believe the stocks will stabilize at or near their current prices. Some even suggest that Fairfield is a good investment at a bargain price.