) reported preliminary unaudited results for the fourth-quarter and
fiscal year. For the fourth quarter, the company expects revenues
in a band of $107 and $111 million while revenues for the fiscal
year are pegged in the region of $428 million to $431 million.
Earnings per share for the fourth quarter are expected to be in
the region of 24 cents to 27 cents while that for the fiscal year
should be about $1.27 to $1.30.
Results for the fiscal fourth quarter were negatively impacted
by delays in recognition of sales to a large client as well as lags
in closing deals.
The company issued guidance for fiscal 2013. It expects revenues
to grow 20% to 24% and earnings per share to rise 20% to
Quality Systems runs a pure-play business model, in an
attractive industry, with a large number of catalysts, which
provoke frequent speculation about mergers and acquisition. In
recent times, the company has not only well managed its ambulatory
clinical deals but, in addition, has nicely executed several
enterprise contracts. Also, on the positive side, we derive comfort
from the high proportion of recurring revenues and steady growth in
its NextGen pipeline.
However, competition is intense from well regarded players such
Allscripts Healthcare Solutions
) and others. Price discounting is frequent, particularly on the
lower end, and Software as a Service (SaaS) based model appears to
have exacerbated pricing pressure.
Quality Systems has traditionally focused on providing solutions
for physician practices. However, core ambulatory EHR providers,
such as Quality Systems, will see opportunities shrinking for
selling their products as physician groups are increasingly getting
absorbed into hospitals.
We are currently Neutral on the stock, supported by a short-term
Zacks #3 Rank (Hold).
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