Corvel earnings up, revenues down

Corvel Corporation announced that earnings were up substantially although revenues dropped by 10% in the last quarter of 2005. EPS were up 45% from a year earlier, despite a decrease in revenues from $70 million to $63 million. The announcement followed other recent news indicating continued struggles by CorVel.
The company’s press release blamed the drop in revenue on various contributors including the decrease in workers comp claims, offshoring of jobs, regulatory compliance issues, and the hurricane.
Well…all these may have had some impact, but claims did not drop 10% from the prior year, and the jobs that were outsourced were not in retail, transportation, food service, health care, and construction, major contributors to the nation’s occupational injury count.
What’s really happening? Likely several issues. First, CorVel has been looking for a COO for some time, likely recognizing that there are internal challenges (i.e. problems) that need more and better attention. Second, CorVel’s IT infrastructure is highly decentralized, making it tough for the company to compete for national business. Third, their provider network is faring poorly in competition with Aetna, First Health, and Focus.
Rumors have been floating about the possibility of a leveraged buyout of CorVel. Anything’s possible.