On Sep 19, we reiterated our recommendation on Allscripts Healthcare Solutions, Inc. (MDRX) at Neutral. Although its second-quarter 2013 revenues and earnings missed the Zacks Consensus Estimates, bookings improved significantly in the quarter, driven by new and upgraded products.
Why the Retention?
On Aug 8, Allscripts Healthcare posted a significant fall in adjusted earnings to $2.2 million or a penny per share in the second quarter of 2013 from $23.1 million or 13 cents in the comparable quarter of 2012. With this, earnings also missed the Zacks Consensus Estimate of 7 cents for the quarter. Revenues in the quarter ebbed 6.8% to $344.8 million, again missing the Zacks Consensus Estimate of $358 million.
The company’s earnings have failed to beat the Zacks Consensus Estimate in 3 out of the last 4 quarters, with an average negative surprise of 44.64%. Following the earnings release, the Zacks Consensus Estmate for 2013 remained unchanged at 20 cents per share over the last 30 days. However, the estimate for 2014 decreased 2.4% to 41 cents over the same period. Currently, the stock has a Zacks Rank #3 (Hold).
Following a period of multiple disruptions, Allscripts Healthcare is trying to turn around its business on the back of fresh initiatives. We believe that the company’s restructuring efforts are beginning to pay off. The recent improvement in bookings has reinstated client confidence in Allscripts Healthcare’s new offerings.
MDRX continues to benefit from the movement among medical providers seeking to comply with federal EHR requirements. Further, its non-EHR offerings for the untapped HCIT market, such as population health management and care coordination, are considered to be future growth drivers. The acquisitions of dbMotion and JarDogs should boost Population Health Management revenues. However, Allscripts Healthcare’ ability to integrate acquisitions remains to be proven.
MDRX faces strong competition from large players such as Cerner (CERN) and athenahealth (ATHN) in a fragmented market. Additionally, the company’s system sales continue to decline, which is a cause of concern. The lingering global economic weakness presents substantial risk for Allscripts Healthcare.
Other Stocks to Consider
Currently, medical information systems stock Medidata Solutions, Inc. (MDSO) warrants a look. It carries a Zacks Rank #2 (Buy).