Allscripts (MDRX) Misses Q3 Earnings And Revenue Estimates

Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) posted third-quarter 2018 adjusted earnings per share of 18 cents, which missed the Zacks Consensus Estimate by a penny. Earnings also improved 12.5% on a year-over-year basis.

Revenues in the quarter came in at $535.8 million on a non-GAAP basis, which missed the Zacks Consensus Estimate of $546 million. However, the figure improved 18.8% year over year. On a reported basis, revenues totaled $522 million in the quarter, reflecting an increase of 16% year over year.

Bookings in the reported quarter came in at $246 million, significantly down from the prior-year quarter’s tally of $304 million. In fact, management expects to some volatility in bookings in the quarters ahead.

The stock carries a Zacks Rank #4 (Sell).

Allscripts Healthcare Solutions, Inc. Price and Consensus

Allscripts Healthcare Solutions, Inc. Price and Consensus | Allscripts Healthcare Solutions, Inc. Quote

Segment Details

Software delivery, Support and Maintenance

Revenues in the segment grossed $330.4 million on a reported basis, up 14.3% from the year-ago quarter's tally.

Client services

Revenues in the segment came in at $191.9 million, up 19.7% from the year-ago quarter's figure.

Margins

In the quarter under review, gross profit totaled $218.4 million, up 8.1% from the year-ago quarter's level. As a percentage of revenues, gross margin was 41.8%, down from 69.8% in the year-ago quarter. The lackluster performance was primarily caused by decline in non-recurring software license revenues.

Selling, general and administrative expenses in the quarter totaled $133.2 million, up 13.5% year over year. Research and development expenses totaled $69.7 million, up 36.4% year over year.

Adjusted operating income in the quarter was $15.5 million, down 53.7% year over year. Adjusted operating margin was 3%, as a percentage of revenues.

Guidance

On an adjusted basis, Allscripts expects 2018 revenues in the lower end of $2.15 billion and $2.25 billion, up 17-22% year over year. The Zacks Consensus Estimate is pegged at $2.17 billion, within the guided range.

Adjusted earnings per share (EPS) are expected in the lower end of 72 cents and 82 cents, reflecting an increase of 16% to 32% year over year. The Zacks Consensus Estimate is at 75 cents, within the projected range.

Adjusted EBITDA is anticipated between $420 million and $460 million, up 12% to 23% year over year.

Summing Up

Allscripts ended the third quarter on a tepid note, missing the Zacks Consensus Estimate for both the counts. The company’s margins are under pressure due to decline in non-recurring software license revenues. Year-over-year decline in bookings is a concern. In fact, management expects to some volatility in bookings in the quarters ahead. Additionally, the company witnessed significant contraction in margins. The company is also exposed to integration risks. Intense competition in the niche space adds to the woes.

On the positive side, the company continues to gain from the core software, delivery, support and maintenance units, which projected solid growth. The company’s growth in revenue cycle services and acquisition of McKesson’s EIS business have lent it a competitive edge. The recently-closed acquisition of HealthGrid is likely to boost the company’s FollowMyHealth patient engagement platform. Management is also optimistic about benefits from the sale of OneContent, which was closed earlier this year.

Q3 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, having reported solid earnings this season, are Stryker Corporation (NYSE:SYK) , Intuitive Surgical, Inc (NASDAQ:ISRG) and Merit Medical Systems, Inc (NASDAQ:MMSI) .

All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported adjusted earnings of $2.83 per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of $2.65. Adjusted earnings improved 1.8% year over year.

Stryker delivered third-quarter 2018 adjusted EPS of $1.69, which beat the Zacks Consensus Estimate of $1.68. Earnings improved 11.2% year over year, within the company’s guidance.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate of 42 cents. Adjusted earnings improved 46.9% from the year-ago quarter’s tally.

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