On Dec 6, we maintained our Neutral recommendation on
). We are encouraged by the company's robust utilization trends
and rapid strides in capturing the Electronic Health Record (EHR)
business of physician practices. However, we are concerned about
the headwinds faced by ATHN due to changes in government
On Oct 17, athenahealth reported adjusted earnings of $8.0
million or 21 cents per share (excluding amortization and
integration and transaction costs) for the third quarter of the
year, exceeding the Zacks Consensus Estimate of 15 cents per
share. This translated into a 15.5% rise in net earnings from
$7.0 million and 10.5% rise in earnings per share from 19 cents
in the comparable quarter a year ago.
Revenues in the quarter surged 43.1% to $151.5 million but missed
the Zacks Consensus Estimate of $155 million. Excluding the
Epocrates and other revenues (consisting of third-party tenant
revenues) totaling $17.2 million, core athenahealth revenues rose
27% to $134.3 million. Growth was led by expanded clientele for
the company's offerings since the acquisition of Healthcare Data
Services and strong athenaCoordinator business.
Following the release of third quarter results, the Zacks
Consensus Estimate for 2013 remained the same at 33 cents per
share. However, the Zacks Consensus Estimate for 2014 went down
6.0% to 63 cents over the same timeframe. ATHN now has a Zacks
Rank #3 (Hold).
athenahealth's unique business model makes it a strong niche
provider of RCM services (athenaCollector) to small physician
practices. Its SaaS-based approach allows for a lower cost and
more flexible delivery mechanism that is expected to help ATHN
win deals. Further, its EHR product (athenaClinical) is a key
player in ambulatory or physician billing.
However, athenahealth's long-term goal of 30% top-line growth is
challenging, given the consolidation trend among small physician
practices. Moreover, the company faces strong competition from
EHR products of
Allscripts Healthcare Solutions
Other Stocks to Look For
In the absence of any better-ranked stocks in the medical
information systems industry, we can consider
Hill-Rom Holdings, Inc.
) from the medical products industry. Hill-Rom Holdings carries a
Zacks Rank #1 (Strong Buy).
ATHENAHEALTH IN (ATHN): Free Stock Analysis
CERNER CORP (CERN): Free Stock Analysis
HILL-ROM HLDGS (HRC): Free Stock Analysis
ALLSCRIPTS HLTH (MDRX): Free Stock Analysis
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