MDRX Trails Est., Profit Declines - Analyst Blog

By Zacks | May 03, 2012 AAA

Allscripts Healthcare Solutions (MDRX), a leading player in the health care information technology ("HCIT") market, reported first quarter adjusted (excluding one-time items other than stock-based compensation expense) earnings per share of 10 cents, trailing the Zacks Consensus Estimate of 20 cents. Reported net income for the quarter was $5.8 million (or 3 cents per share) compared with a net income of $12.6 million (or 7 cents per share) in the year-ago quarter. The lower profit was on account of several factors such as deterioration in sales mix and expenditures for marketing and product development.

Revenues

Allscripts reported sales of $364.7 million in the first quarter, lagging the Zacks Consensus Estimate of $388 million. Adjusted revenues were $365.5 million, up 5.6% year over year. Sales were below forecast on account of deferred purchases by clients and restructuring of the sales force. Bookings came to $194.6 million, a decrease of 8.4% year over year.

Segment-wise Data

Reported revenues consisted of System Sales, Professional Services, Maintenance and Transaction Processing, which constituted 11.1%, 19.6%, 31.5% and 37.8%, respectively, of total revenues in the reported quarter. 

Margin

Adjusted gross margin dropped to 42.9% of sales in the reported quarter, lower than 49.3% in the prior-year quarter. Adjusted operating margin was 11.2% of sales, lower than 20.8% in the year-ago quarter.

Balance Sheet

As of March 31, 2012, Allscripts had cash and marketable securities of $175.7 million, up 11.3% on a sequential basis. The company had long-term debt of $295.2 million, down 8.5% sequentially.  

Outlook

The company adjusted its guidance for 2012. It currently expects adjusted revenues in the range of $1,480 million to $1,520 million. Adjusted operating margin is projected at about 16% to 17%. Adjusted earnings per share are forecast between 74 cents and 80 cents.

The health care information technology market is competitive and price sensitive. Among others, Allscripts faces strong competition from Cerner Corp. (CERN), Quality Systems (QSII) and Athenahealth (ATHN).

However, optimism about the growth prospects of select HCIT service providers remains high under the Obama Administration, which passed the Stimulus package in May 2009, aimed at increasing the use of electronic health record ("EHR") systems by medical practitioners.

The company has widened its user base after its mergers with Misys and Eclipsys and increased cross-selling opportunities.  We believe that Allscripts is well positioned in the fast growing business of selling EHR/EMR to physician practices as well as inpatient settings.

The acquisition of Eclipsys provides the company with an acute care product for sale in concert with its ambulatory services. We opine that acute and ambulatory care will continue to converge in future and that Allscripts is well positioned to provide integrated clinical applications that will permit health care providers to satisfy HITECH Act requirements and eventually comply with an outcomes-based reimbursement system. 

 
ATHENAHEALTH IN (ATHN): Free Stock Analysis Report
 
CERNER CORP (CERN): Free Stock Analysis Report
 
ALLSCRIPTS HLTH (MDRX): Free Stock Analysis Report
 
QUALITY SYS (QSII): Free Stock Analysis Report
 
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