Quality Systems (QSII) Q4 Earnings: Is a Beat in Store?

Shutterstock photo

Quality Systems, Inc 's QSII fourth-quarter fiscal 2018 earnings are scheduled to release on May 24. Lucrative prospects in Revenue Cycle Management ("RCM") services, solid recurring revenue base and high demand for NextGen solutions are expected to drive the company's top line in the quarter to be reported.

Notably, Quality Systems pulled off a positive average earnings surprise of 13.6% in the trailing four quarters. In the last reported quarter, the company delivered adjusted earnings of 15 cents per share, in line with the Zacks Consensus Estimate. However, adjusted earnings declined 34.8% on a year-over-year basis. Revenues totaled $131.7 million in the quarter, which marginally beat the Zacks Consensus Estimate of $131 million. Revenues increased 3% year over year.

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $131.9 million, reflecting year-over-year decline of 0.4%. The same for earnings is pegged at 13 cents, showing year-over-year fall of 38.1%.

Quality Systems, Inc. Price and EPS Surprise

Quality Systems, Inc. Price and EPS Surprise | Quality Systems, Inc. Quote

Let's delve deeper.

Factors at Play

Lucrative Prospects in the RCM Space

Quality Systems is a major player in the U.S. RCM market. The company's NextGen RCM platform continues to win contracts from healthcare providers. The company is also increasing headcount to boost RCM adoption. NextGen Healthcare scored the highest among all ambulatory vendors for its performance in the following key RCM areas - effectiveness of claims processing, patient-facing support performance, efficiency gained by customers, sustainability of pricing and trust as a business partner.

Based on the popularity of the RCM solution, the company plans to expand into dental and hospital markets, which will further boost thetopline in the quarter to be reported.

In fact, based on the exclusivity of Quality Systems' solutions, the company announced that several of its platforms received 'Certified' status by HITRUST in March. The HITRUST CSF Certification provides organizations with certain platforms that safeguard sensitive data through a comprehensive and flexible framework of security protocols.

These are likely to boost the company's fourth-quarter bottom line.

Solid Demand for NextGen Solutions

Apart from RCM, Quality Systems will continue to benefit from strong demand for its other NextGen solutions that include Hospitals, EHR and practice management in the fourth quarter. NextGen's Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining considerable traction. The latest deals in the platforms with EagleDream and Entrada look promising.

In fact, NextGen Healthcare unveiled a new corporate logo and brand identityin March. The new logo is the perfect representation of Quality Systems' recent acquisitions that provided the company with a competitive edge in the MedTech space.

Recurring Revenue Base

Strong recurring-revenue base has been a growth catalyst for Quality Systems, which offset the decline in perpetual licenses and related services. Solid expansion of the recurring base is likely to boost the company's upcoming quarterly results.

Meanwhile, a peek at the last reported quarter reveals that subscription-based recurring revenues accounted for 84% of total revenues. In fact, recurring revenues grew 5.5% year over year to $110 million.

What Does Our Model Predict?

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP .

Quality Systems has a Zacks Rank #3 and an Earnings ESP of +5.00%. The combination suggests that the company is likely to beat earnings estimates in the yet-to-be-reported quarter. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Conversely, we caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks Worth a Look

Here are a few other stocks worth considering as they also have the right combination of elements to post an earnings beat in the quarter to be reported.

Brady Corporation BRC has an Earnings ESP of +1.03% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Medtronic MDT has an Earnings ESP of +0.09% and a Zacks Rank #3.

DXC Technology Company DXC has an Earnings ESP of +1.06% and a Zacks Rank of #2.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Quality Systems, Inc. (QSII): Free Stock Analysis Report

Medtronic PLC (MDT): Free Stock Analysis Report

Brady Corporation (BRC): Free Stock Analysis Report

DXC Technology Company. (DXC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: MDT , BRC , DXC

More from Zacks.com




Equity Research

Research Brokers before you trade

Want to trade FX?