AMS Stock Falls 23%% on Word of Profit Let-Down

Stock of American Management Systems Inc. plummeted 23% last week on word that its annual earnings would not meet expectations.

But encouraged by long-term prospects, analysts maintained their strong rating of the software and consulting company.

In a press release, Fairfax, Va.-based AMS warned investors that annual earnings could be as low as 81 cents per share - far below Wall Street's consensus estimate of 93 cents, as published by First Call.

AMS officials blamed a delayed technology project with an undisclosed customer for the lowered expectations. Company officials declined to say more on the matter.

American Management Systems shares, which opened Monday at $31.875, dropped as low as $20 last week in heavy trading.

But the stock crept upward to close at $24.50 as investors engaged in bargain hunting.

The buying got a boost after Ferris, Baker Watts Inc. analyst William Loomis upgraded AMS at midweek to a "strong buy" from "buy."

The drop in stock price "is probably expected in this market, Mr. Loomis said. "But we do think it's an overreaction, and that's why we raised the rating."

He said American Management Systems officials told him that the troubled contract is in renegotiation, and that its business will "be on track again in the first quarter."

Alex. Brown & Sons Inc., a Baltimore-based analyst firm, maintained its "buy" rating, citing AMS' projected growth.

Third-quarter revenue of AMS' financial services business was up 21% from the year-earlier period.