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Can Business Services Aid athenahealth's (ATHN) Q1 Earnings?

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athenahealth Inc. ATHN is scheduled to report first-quarter 2018 results on Apr 27, after the market closes. The company’s strong product portfolio, solid network expansion strategies and unique business model are key tailwinds at the moment.

Last quarter, athenahealth posted adjusted earnings of $1.11 per share, which beat the Zacks Consensus Estimate of 64 cents. Further, earnings increased a whopping 79% on a year-over-year basis. The company posted revenues of $329 million, beating the Zacks Consensus Estimate of $323 million. Revenues increased 14.2% year over year.

For the current quarter, the Zacks Consensus Estimate for revenues is pegged at $318.5 million, reflecting a rise of 11.6% year over year. The Zacks Consensus Estimate for earnings is pegged at 73 cents, indicating an increase of 128.1% year over year.

athenahealth, Inc. Price and EPS Surprise

 

athenahealth, Inc. Price and EPS Surprise | athenahealth, Inc. Quote

We expect athenahealth to witness steady growth in Business Services sales — one of the major revenue components. While this is projected to drive first-quarter 2018 earnings, an expected improvement in Implementation and Other segment will also help the company generate impressive results.

Considering these, the question lingering in investors’ minds is whether athenahealth will be able to deliver a positive earnings surprise in the to-be-reported quarter. Let’s delve into other factors which are likely to impact the company’s first-quarter 2018 results.

Business Services in Focus

Business Services contributed 97.7% of net revenues in the last quarter. For the upcoming quarterly result, the Zacks Consensus Estimate for Business Services is pegged at $312 million, reflecting a rise of 12.2% year over year.

Applications like athenaClinicals, athenaClinicals-Streamlined, athenaInsight, athenaCommunicator, athenaOne, athenaCollector for Hospital and Health Systems and the brand promise of ‘Unbreak Healthcare’ comes under athenahealth’s business services segment.

The segment has been fortifying the company’s market position in terms of exclusiveness of services in the respective markets.

athenahealth’s unique business model makes it a strong niche provider of revenue cycle management (RCM) services to small physician practices. Meanwhile, per a research report by Markets And Markets, the global revenue cycle management market is projected to reach $7.09 billion by 2020, at a CAGR of 11.8%.

The upcoming results are likely to indicate strong growth in the Business Services unit.

Other Factors at Play

Implementation and Others

Implementation and Others contributed 2.4% of net revenues in the last quarter. The Zacks Consensus Estimate for Implementation and Others is pegged at $7.3 million, reflecting a rise of 2.8% year over year.

The segment includes Electronic Health Record (EHR) and Electronic Medical Record implementations.

Of late, athenahealth has been hogging the limelight on its cloud-based big data network — athenaNet. Recently, the company launched a machine-learning model to automate faxes.

Developments like these in the Implementation and Others are likely to drive athenahealth, which are likely to be reflected in first-quarter 2018 results.

Strong Product Portfolio

athenahealth’s portfolio comprises a wide array of products that include electronic health records, revenue cycle management, medical billing, patient engagement, care coordination, population health management and Epocrates. By the end of the fourth quarter of 2017, athenahealth launched its first machine learning model to automate faxes. The company piloted services like authorization management, which has been planned to expand the company’s client base throughout 2018.

athenaInsight, an online news hub that reports on U.S. healthcare activities and trends of healthcare providers and ‘de-identified patients’ has also been a major contributor.

In 2017, athenahealth rapidly expanded its patient record sharing capabilities with CommonWell and Carequality.

The upcoming quarterly results will reflect benefits from the company’s strong product portfolio.

Aggressive Rivalry

On the flipside, athenahealth’s EHR solution faces significant competition from the likes of Allscripts Healthcare Solutions and others.

Competitors such as Cerner offer long-standing seamless products integrating inpatient and ambulatory-care systems.

This might dampen the company’s prospects, which will reflect on first-quarter 2018 results.

What Our Model Predicts

Our quantitative model does not conclusively predict an earnings beat for athenahealth this quarter.

This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. It can be illustrated below:

Zacks ESP: Earnings ESP for athenahealth is -7.46%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: athenahealth carries a Zacks Rank #3.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Edwards Lifesciences Corporation EWhas an Earnings ESP of +0.99% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hologic, Inc. HOLX has an Earnings ESP of +0.94% and a Zacks Rank #3.

Teleflex Incorporated TFX has an Earnings ESP of +0.58% and a Zacks Rank #3.

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