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athenahealth (ATHN) Beats Earnings, Misses Revenues in Q3

athenahealth Inc.ATHN reported adjusted earnings of 56 cents per share in the third quarter of fiscal 2017, steering past the Zacks Consensus Estimate of 50 cents. However, earnings lagged the year-ago quarter's 60 cents.

The Watertown, MA-based maker of billing and medical practice management software posted revenues of $304.6 million, missing the Zacks Consensus Estimate of $311 million. However, revenues increased 10.1% on a year-over-year basis.

athenahealth has a Zacks Rank #4 (Sell).

Quarter Highlights

Segment Details: athenahealth reported Business and Services revenues of $295.8 million, up 10.7% from the year-ago quarter. However, the implementation and other segment posted revenues of $8.8 million, down 38.3% from a year ago.

Margin Details: A strong client base has been a major growth driver for the company. Adjusted gross margin in the third quarter was 64%, compared with 65.1% a year ago.

athenahealth, Inc. Price, Consensus and EPS Surprise

athenahealth, Inc. Price, Consensus and EPS Surprise | athenahealth, Inc. Quote

The company saw an operating margin of 13% of total revenue in the third quarter, compared to 15% in the year-ago quarter. Notably, adjusted operating income in the reported quarter was $39.5 million.

Network Expansion: Per management, the company expanded its network across ambulatory, hospital and population health platforms. The company's network expanded to over 106,000 providers, 102 million unique patient records, and 3.2 million covered lives at the end of the third quarter. Buoyed by stellar network expansion, the company is expected to fortify its foothold in the Revenue Cycle Management (RCM) space and drive revenues and earnings over the long haul.

Guidance Revised

athenahealth revised its guidance for fiscal 2017.

For fiscal 2017, the company slashed its revenue guidance to the band of $1,200-$1,220 million from earlier $1,210-1,250 million.

Adjusted operating income guidance has been raised to the range of $135-$150 million from the earlier band of $120-$140 million.

Annual bookings for the fiscal are expected at around $300-$350 million, as compared with the prior range of $350-$400 million.

Bottom Line

athenahealth exited the third quarter of fiscal 2017 on a mixed note, with earnings outpacing the Zacks Consensus Estimate and revenues missing the same. Business and Services revenues witnessed year-over-year growth while the implementation and other segment saw a decline. Also, the contraction in margins added to the woes. Per management, the company expanded its network across ambulatory, hospital and population health platforms. We believe applications like athenaClinicals, athenaClinicals-Streamlined, athenaInsight, athenaCommunicator, athenaOne, athenaCollector for Hospital and Health Systems and the brand promise of 'Unbreak Healthcare' are fortifying its market position in terms of exclusiveness of services provided in the respective markets.

Key Picks

A few better-ranked stocks in the broader medical sector are SONOVA HOLDING SONVY , EnteroMedics Inc. ETRM and Luminex Corporation LMNX . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

SONOVA represented a solid return of 8.1% over the last three months. The company has a long-term expected earnings growth rate of 7%.

EnteroMedics has an average earnings beat of 55.8% for the trailing four quarters. The company has a solid return of 7.1% for the past month.

Luminex came up with a positive earnings surprise of 188.9% last quarter. The stock has a long-term expected earnings growth rate of 16.3%.

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


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

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