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athenahealth (ATHN) Shares Rally on Earnings Beat in Q2

Zacks Equity Research
Updated

athenahealth Inc. ATHN reported adjusted earnings of 51 cents per share in the second quarter of fiscal 2017, steering past the Zacks Consensus Estimate of 7 cents per share. In fact, the figure is way better than adjusted earnings of 6 cents per share registered in the year-ago quarter.

The Watertown, MA-based maker of billing and medical practice management software posted revenues of $301.1 million, which also beat the Zacks Consensus Estimate of $298.48 million and increased 15% on a year-over-year basis.

Share price of athenahealth inched up 0.2% to close at $143.80 following the earnings release.

In fact, over the last three months, athenahealth has had an impressive run on the bourse. The stock climbed 20.9%, significantly higher than Zacks categorized Medical Info Systems sub-industry’s return of only 11.5%. However, the estimate revision for the stock has been unfavorable. The Zacks Consensus Estimate for full-year earnings per share declined 29.4% to 84 cents over the last three months.

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athenahealth has a Zacks Rank #3 (Hold).

Quarter Highlights

Segment Details: athenahealth reported Business and Services revenues of $293 million, up 15.3% from the year-ago quarter. However, implementation and other segment posted revenues of $8.1 million, up 3.8% from the same quarter last year.

Margin Details: A strong client base has been a major growth driver for the company. Adjusted gross margin in the second quarter was 64.2%, compared with 62.8% a year ago.

The company saw an operating margin of 11.9% of total revenue in the second quarter, compared to 9.1% in the year-ago quarter. Notably, adjusted operating income in the reported quarter was $35.9 million.

Network Expansion: Per management, the company expanded its network across ambulatory, hospital and population health platforms. The company’s network expanded to over 100,000 providers, 98 million unique patient records, and 2.8 million covered lives at the end of the second quarter. Buoyed by stellar network expansion, the company is expected to fortify its foothold in the Revenue Cycle Management (RCM) space and drive revenue and earnings growth over the long haul.

athenahealth, Inc. Price, Consensus and EPS Surprise

 

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

Guidance Reaffirmed

athenahealth reiterated its guidance for fiscal 2017.

For fiscal 2017, the company expects revenues in the band of $1,210–$1,250 million.

Adjusted operating income is projected in the range of $120–$140 million.

Annual bookings for the fiscal are expected at around $350–$400 million.

Bottom Line

athenahealth exited the second quarter of fiscal 2017 on a solid note, outshining the Zacks Consensus Estimate for earnings and revenues. Per management, the company expanded its network across ambulatory, hospital and population health platforms.  athenahealth’s unique business model makes it a strong niche provider of RCM services to small physician practices. 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. Furthermore, solid revenue guidance instills our confidence in the stock.

Key Picks

A few better-ranked stocks in the broader medical sector are Edwards Lifesciences Corporation EW, CryoLife, Inc. CRY  and EDAP TMS SA EDAP. Notably, EDAP TMS sports a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences and CryoLife have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EDAP TMS represents an impressive return of 22.09% for the last three months. The company delivered a solid earnings surprise of 533.3% in the last reported quarter.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. Notably, the stock boasts an impressive one-year return of 12.4%.

CryoLife yielded a strong return of 24% over the last three months. The stock delivered a positive earnings surprise of 80% in the last reported quarter.

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