Shares of Woodland Hills based Health Net Inc. stayed down May 4 after plunging 25 percent to $27.26 a day earlier on a shortfall in earnings. The company reported lower than expected earnings for the quarter, prompting a 25 percent cut in projected 2012 earnings by the company.

Shares closed at $27.58 on May 4, up $0.32.

The drop prompted some analysts, including Goldman Sachs, to issue a buy rating on the stock today based on the low valuation and a $35 target.

Health Net blamed the lower earnings on insurance claims that spilled over from the fourth-quarter due to a change in regulations in claims processing.

The company said the lower than expected earnings were the result of $67 million in “adverse prior period claims development,” meaning delayed claims from the fourth-quarter drove down earnings for the current quarter and are expected to continue to affect earnings for the remainder of the year.

The company reported a loss of $26.6 million, or $0.32 a share, for the quarter ended March 31, compared with a loss of $108.2 million, or $1.16 per share, for the first quarter of 2011. Revenues decreased 15.8 percent to $2.8 billion compared to $3.4 billion in the same period a year ago. The company said the decline was due a drop-off in government contracts.

The company said health plan services premium revenues increased by 7.1 percent to $2.6 billion in the first quarter of 2012 compared with $2.4 billion in the first quarter of 2011.

Result were also affected by discontinued operations. Excluding the impact from the delayed claims and discontinued operations, Health Net said it earned $8.2 million, or $0.10 per diluted share, compared with $72.9 million, or $0.77 per diluted share, for the first quarter of 2011. Those results fell short of the 60 cents a share that analysts were projecting, leading to the sell-off Thursday.

The lower than expected earning also led to a revision of 2012 guidance. The company now expects a full-year profit of $2.35 to $2.50 per share for its combined Western Region and Government Contracts segments, compared with its earlier forecast of $3.30 to $3.40 per share.

Judy Temes