The Zacks Analyst Blog Highlights: Cisco Systems, Athenahealth, Bank of America, Cerner and Merge Healthcare

Zacks


For Immediate Release

Chicago, IL – May 15, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Cisco Systems, Inc. (CSCO), Athenahealth, Inc. (ATHN), Bank of America Corporation (BAC), Cerner Corporation (CERN) and Merge Healthcare Incorporated (MRGE).

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Here are highlights from Tuesday’s Analyst Blog:

What’s In Store for Cisco’s Earnings?

Cisco Systems, Inc. (CSCO) is set to report third quarter 2013 results on May 15. Last quarter it posted a 9% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Though Cisco was affected by the sluggish macro environment, the company’s sales growth rates in the second quarter were above the year-ago comparable period and better than management guidance, attributable to the ramp of several important products and strength in the Data Center, Switching and Wireless lines of business. Order growth was quite encouraging and the trend is reflective of Cisco’s superior strategy and innovation.

However, margin expansion was limited due to an unfavorable mix and increased expenditure on new products.

The company’s restructuring activities to expand its operations in certain strategic areas including cloud computing and the pursuance of growth opportunities in international markets could be potential catalysts going forward. However, we believe that the intense competition in the company's core businesses of routers and switches remains a matter of concern.

Earnings Whispers?

Our proven model does not conclusively show that Cisco will beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method)and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 45 cents. Hence, the difference is 0.00%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Athenahealth Purchases Landmark Property

Leading vendor of cloud-based services for physician practices and inpatient settings, Athenahealth, Inc. (ATHN) recently reported that it has concluded the purchase of the Watertown 'Arsenal on the Charles' from Harvard University. The Arsenal on the Charles is a large multiple building business property spread across 29 acres. It is situated just 10 miles from Boston.

The Arsenal on the Charles is recognized as a historical site. It has 11 buildings first built over 200 years ago. The complex has served as the company headquarters since 2005.

The deal is valued at $168.5 million. The property will ensure that the company has the ability to grow in the health care business.  

ATHN used a fresh $325 million senior bank facility of five years duration to fund its purchase of the Arsenal on the Charles. It comprised of $125 million of unsecured revolving credit and $200 million term loan availability. The latest credit arrangement will take the place of Athenahealth’s present revolving credit arrangement. One of the joint main arrangers was Bank of America Corporation (BAC).

Athenahealth’s web-based deployment provides a low-cost scalable service while its flexible rules engine leads to higher efficiency in claims settlement. The Software-as-a-Service (SaaS)-based approach allows for a more flexible delivery mechanism that helps Athenahealth win deals. The company has traditionally enjoyed high customer satisfaction rates, which facilitates a larger number of referrals.

Athenahealth’s unique business model makes it a strong provider of RCM services (athenaCollector) designed for small physician practices. Its EHR product (athenaClinicals) is a key player in ambulatory settings. We believe that sales of athenaClinicals are likely to remain robust. In addition, the company will harness its newer products, namely athenaCommunicator and athenaCoordinator.

Athenahealth should benefit from its extensive athenaCollector client base, as only a minority of its subscriber base also utilizes athenaClinicals. Cross selling represents a real growth opportunity in the near term. In this regard, Athenahealth has made rapid strides in capturing the EHR business of physician practices. However, this segment is shrinking, as hospitals increasingly absorb physician’s medical practices.

Athenahealth is geared to establish itself in the enterprise segment. The company has recently signed on, and executed several enterprise-sized deals, which provide it with a credible and referenceable client base. In Mar 2013, Athenahealth completed the takeover of Epocrates, a provider of point-of-care digital solutions in the healthcare industry. The acquisition will enable Athenahealth to increase its user network and improve its brand awareness.

Though fresh opportunities are shrinking, the replacement market has been growing. Competition is fierce and larger competitors may benefit from the incumbency factor. Industry stalwarts such as Cerner Corporation (CERN) offer long-standing seamless products which integrate inpatient and ambulatory-care systems.

We currently have a Zacks Rank #3 (Hold) on the company. However, we are more positive about other stocks such as Merge Healthcare Incorporated (MRGE) which carries a Zacks Rank #2 (Buy) and is expected to do well. 

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Read the analyst report on CSCO

Read the analyst report on ATHN

Read the analyst report on BAC

Read the analyst report on CERN

Read the analyst report on MRGE

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