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AllScripts (MDRX) Down 9.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for AllScripts Healthcare (MDRX). Shares have lost about 9.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is AllScripts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Allscripts Q2 Earnings Top Estimates, Revenues Lag

Allscripts Healthcare Solutions, Inc. reported second-quarter 2019 adjusted earnings per share (EPS) of 17 cents, which beat the Zacks Consensus Estimate by 6.3%. However, the bottom line declined 10.5% on a year-over-year basis.

On a non-GAAP basis, revenues totaled $445 million, which missed the Zacks Consensus Estimate by 0.7%. The top line also fell 0.9% year over year. However, on a reported basis, revenues amounted to $444.5 million in the quarter, reflecting year-over-year improvement of 0.7%.

Bookings came in at $276 million, significantly up by 30.8% from the prior-year quarter’s tally.

Segment Details

In a bid to focus on the payer and life sciences market and evolution of the healthcare IT industry, the company realigned its segment reporting structure by divesting its investment in Netsmart on Dec 31, 2018.

The new Provider segment consists of the core integrated clinical software applications, financial management and patient engagement solutions targeted at clients across the entire continuum of care. Meanwhile, the new Veradigm segment mainly focuses on the payer and life sciences market.

Software delivery, Support and Maintenance

In the quarter under review, revenues at the segment grossed $285 million on a reported basis, up 0.2% from the year-ago quarter's tally.

Client Services

At this segment, revenues totaled $159.5 million, up 1.6% from the year-ago quarter's figure.

Margins

Gross profit in the second quarter was $184.1 million, up 6% from the year-ago quarter's level. As a percentage of revenues, gross margin was 41.4%, up 210 bps from the year-ago figure.

Adjusted gross profit amounted to $196.4 million, down 4.8% year over year. Adjusted gross margin was 44.1%, down 180 bps from the prior-year quarter.

Adjusted operating income in the quarter was $44.8 million, down 6.5% year over year. Adjusted operating margin was 10.1%, as a percentage of revenues, down 60 bps from the prior-year quarter.

Financial Update

As of Jun 30, 2019, cash and cash equivalents totaled $138.9 million, down 20.3% from 2018-end level.

Net cash from operating activities for the three months ended Jun 30, 2019, amounted to ($7.7) million, against $8.2 million from the prior-year quarter.

Guidance Revised

For 2019, adjusted EPS are expected in the range of 65-70 cents. The Zacks Consensus Estimate is pegged at 68 cents, within the projected range.

For the third quarter of 2019, adjusted revenues are expected between $445 million and $455 million. The Zacks Consensus Estimate is pegged at $450.1 million, within management’s guided range.

Full-year bookings are anticipated between $1.05 billion and $1.10 billion (up from the previously guided range of $900 million and $1 billion).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, AllScripts has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, AllScripts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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