We downgrade our rating to Neutral for
Allscripts Healthcare Solutions
(
MDRX
). Its first quarter earnings per share of 10 cents missed 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.
Allscripts reported sales of $364.7 million in the first
quarter, lagging the Zacks Consensus Estimate of $388 million.
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.
We view the reduced guidance as indicative of the company's
weakened competitive position. Moreover, the company's ability to
integrate large acquisitions remains to be proven. Further, there
has been a decline in bookings on account of client concern about
product updates and product integration.
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 somewhat 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.
The stock currently retains a Zacks #4 Rank, which translates
into a short-term "Sell" recommendation.
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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