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Athenahealth climbs following 3Q report

NEW YORK (AP) -- Shares of Athenahealth surged Friday as Wall Street applauded the online health records company's third-quarter results.

THE SPARK: Athenahealth, which provides online health record and medical practice services, said Thursday that the number of physicians in its network grew 25 percent compared to last year. The company also said it extended a contract with PSS World, a company that makes and distributes medical products. PSS World was acquired by prescription drug distributor McKesson Corp. earlier this year, and Athenahealth said the new deal more than doubles the number of sales representatives that can market its services.

The new contract will last for five years, Athenahealth said.

THE BIG PICTURE: Athenahealth Inc.'s products include the athenaCollector billing product, athenaClinicals practice management software, and athenaCommunicator software, and it recently acquired the medical app maker Epocrates. The company said a record 2,700 physicians joined its network during the third quarter.

Athenahealth said the Epocrates deal boosted its revenue, but one-time costs from the deal hurt its profit. Excluding one-time items, the company earned 29 cents per share on revenue of $151.5 million, up 43 percent from last year.

Analysts expected Athenahealth to earn 31 cents per share on revenue of $154.8 million, according to a FactSet survey.

THE ANALYSIS: Cowen and Co. analyst Charles Rhyee said the growth in physicians was "very strong" and was far greater than Wall Street had expected. However he said collection rates have slipped as the company has gained new clients, and that problem could persist as Athenahealth adds more big clients in 2014. Rhyee rates the shares "Underperform" with a price target of $93 per share.

SHARE ACTION: Athenahealth shares rose $25.24, or 23.9 percent, to $130.70 in afternoon trading. Earlier they reached an all-time high of $131.98. The stock is up 64 percent over the last year and has been setting new highs since July.