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Allscripts (MDRX) Q4 Earnings Miss Estimates, View Upbeat

Zacks

Allscripts Healthcare Solutions, Inc. MDRX reported fourth-quarter 2016 earnings of 10 cents per share, which missed the Zacks Consensus Estimate by 2 cents. The figure declined 9.1% on a year-over-year basis.

Revenues grew 23.9% total $429.4 million, well ahead of the Zacks Consensus Estimate of $425 million.

Quarter Highlights

Bookings: Bookings in the fourth quarter were $406 million, up 18% on a year-over-year basis. The rise was driven by solid sales of Sunrise in the U.S. and international markets.


Acquisitions: The majoracquisitions done by Allscripts in the quarter include that of Core Medical Solutions, Careport and HealthMEDX. Per management, these acquisitions would position the company better for growth.

The Allscripts Developer Program: In Jan 2017, the program crossed two billion data exchange transactions and launched a new three-tiered program for independent software developers to get connected with the company’s clients.

Share Repurchase Update: In the reported quarter, the company approved a new stock purchase program. Per the program, the company can repurchase up to $200 million of Allscripts common stock through Dec 31, 2019. Under the new program, Allscripts purchased 2.2 million shares of common stock for a total of $24 million at an average cost of $10.63 per share in the quarter.

Revenue Details

Software delivery, support and maintenance revenue: This segment consists of all software, hardware, subscription, other transactions and support and maintenance revenues. According to management, revenues at the segment increased 25%, totaling $284 million in the quarter.

Client services revenue: This segment consists of recurring managed services and other project-based client services revenues. Client service revenues were up 24% on a year-over-year basis to $146 million.

Recurring Revenue: This segment consists of subscriptions, recurring transactions, support and maintenance and recurring managed services. Recurring revenues increased 23% on a year-over-year basis. However, when compared to the third quarter of 2016, revenues at the segment witnessed a modest 4% rise.

Non-recurring revenue: This segment comprises systems sales and other project-based client service revenues. Non-recurring revenues increased 28% on a year-over-year basis. Also, revenues at the segment grew a notable16% from the third quarter of 2016.

Margin Details

As a percentage of revenues, gross margin in the fourth quarter was 48.1% compared with 47.3% registered in the year-ago quarter.

Adjusted operating expenses in the quarter totaled $146 million, a 22% increase on a year-over-year basis.

Guidance

For the full year, the company expects revenues between $1.71 billion and $1.74 billion, implying growth of 8–10%. Adjusted earnings per share are expected to grow in the band of 10% to 15% for the full year.

Stock Performance

The price performance of Allscripts has been encouraging. Over the last three months, the stock added 14.8%, higher than the Zacks classified Medical Info Systems sub-industry’s gain of 9.1%. Also, the current level compares favorably with the S&P 500’s return of 6.9% over the same time frame. Furthermore, the estimate revision trend for the stock has been favorable. The full year has seen three estimates move north over the last two months, compared with no movement in the opposite direction. Notably, the estimate for full year stands at 42 cents at the moment.

However, the company projects sales growth of 9.6% for the current year, lower than the broader industry’s 18.7% over the same frame.

These mixed sentiments justify the stock’s Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the broader medical sector include Glaukos Corporation GKOS, Avinger, Inc. AVGR and Fluidigm Corporation FLDM. Notably, Glaukos sports a Zacks Rank #1 (Strong Buy) while Avinger and Fluidigm carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Glaukos Corporation has a long-term expected earnings growth rate of approximately 25%. Notably, the stock represents an impressive one-year return of 180.8%.

Avinger projects sales growth of 30.7% for the current year. Additionally, the company posted a positive earnings surprise of 27% in the last quarter.

Fluidigm Corporation has a long-term expected earnings growth rate of 25%. The stock has added 10.3% over the last one-year.

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