UPDATE: Compass Point Reiterates On Performant Financial Corp. As 3Q Corrections Decline Sharply

In a report published Wednesday, Compass Point analyst Michael Tarkan reiterated a Buy rating on Performant Financial Corp. (NASDAQ: PFMT), but lowered the price target from $12.00 to $11.00.

In the report, Compass Point noted, “We reiterate our Buy rating on PFMT but are lowering our price target to $11, from $12, after CMS released weaker-than-expected correction results of its Recovery Audit Contractor (RAC) program for the September-quarter. While we had expected a falloff in 3Q as new RAC activity was essentially shut down in June, the steep decline still came in below our previous projections. As a result, we are lowering our 2014 and 2015 EPS estimates to $0.37 and $0.60, respectively, from $0.40 and $0.65.

"Despite our lower projections, there is no change to our thesis on PFMT -- we continue to await resolution of the RAC contract awards but the company's longer-term outlook remains bright as increasing diversification of the revenue base, combined with new contract wins and steady student lending production should ultimately drive the stock higher. In terms of the new RAC contract award, while the appeal by CGI Federal (GIB-NC) remains outstanding, but both CGI and CMS have moved to expedite the process, which could speed up the time to contract award.”

Performant Financial Corp. closed on Tuesday at $8.08.