Nighthawk cuts jobs, closes offices, but still poised for growth, analyst says

Nighthawk remains poised for growth despite a recent announcement that it is closing some offices and cutting jobs, according to a financial analyst who follows the company.

On June 11 Nighthawk announced in its 8-K filing to the Securities and Exchange Commission its plan to reduce operating costs by closing offices in San Francisco and Austin, TX, and a portion of its facility in Coeur d’Alene, ID. The company will lay off 35 employees. Nighthawk says it will incur restructuring costs of approximately $1.1 million, with $600,000 in lease disposal charges, $200,000 in asset write-off charges, and $300,000 in employee severance costs.

Before the June 11 announcement Nighthawk released its commitment to radiologists, setting limits on what it will do to obtain new contracts in hospital settings. That statement was taken by some to mean the company was poised for growth.

Nighthawk did not reply to requests for comment about the layoffs and office closings. But financial analyst Sean Wieland, a managing director and a senior research analyst at Piper Jaffray, said the announcement to close offices and cut jobs was just bad timing.

“I think they’re focusing some of their resources,” he said. “Just like a doctor who identifies cancer in a patient and has to cut some things out, that’s what it looks like they’re doing.”

Nighthawk’s stock has trended down recently. At close of business on June 25 it was trading at $2.63 compared with June 25, 2009, when it traded at $3.76. Still, Wieland recently upgraded his assessment of the stock from sell to neutral. Other analysts recommend holding the stock as well. Two months ago, four analysts had Nighthawk stock at hold and one said it was underperforming.

Nighthawk’s stock may improve because the company is refocusing its business, and a private equity firm just bought their closest competitor, Virtual Radiologic. “If you apply those kinds of multiples to Nighthawk-refocusing their business and their closest competitor being bought out-it’s hard to see a lot of downside left in the stock now,” Wieland said.