athenahealth Inc. ATHN is set to report third-quarter 2016 results on Oct 21. Last quarter, the company posted earnings of 6 cents per share, which missed the Zacks Consensus Estimate of 16 cents.
Notably, on an average, athenahealth beat the Zacks Consensus Estimate by almost 189.6% over the last four quarters.
Let’s see how things are shaping up for this quarter.
Factors at Play
We believe a strong product portfolio and expanding physician base will continue to drive athenahealth’s top line. Additionally, the launch of athenaInsight, acquisition of Filament Labs and introduction of MIPS guarantee (Merit-Based Incentive Payment System) hold considerable promise.
However, on the flip side, lack of enterprise-sized deals, winding up of government funded stimulus and increasing competition in the HCIT market are major dampeners.
Notably, in the second quarter of 2016, athenahealth added 1,528 physicians, down year over year from 2,114 physicians to athenaCollector; 1,180 physicians, up from 1,127 physicians to athenaClinicals; and 1,489 physicians, down from 1,670 physicians to athenaCommunicator.
Our proven model does not conclusively show that athenahealth is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP for athenahealth is -4.76%. This is because the Most Accurate estimate stands at 20 cents while the Zacks Consensus Estimate is pegged at 21 cents.
Zacks Rank: athenahealth carries a Zacks Rank #3, which when combined with a negative ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a few stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Ariad Pharmaceuticals Inc. ARIA, with an Earnings ESP of +10.00% and a Zacks Rank #1. Additionally, the stock represents a stellar one-year return of 59.1%.
Exelixis Inc. EXEL, with an Earnings ESP of +15.39% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. Notably, the company has a stupendous one-year return of 111.4%.
Glaukos Corporation GKOS has an Earnings ESP of +200.00% and a Zacks Rank #1. We note that the company represents an impressive one-year return of 57.2%.
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