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athenahealth Inc. (ATHN - Analyst Report) revealed that it has entered a strategic partnership with healthcare technology solutions provider Merge Healthcare Incorporated (MRGE - Analyst Report) to improve its electronic health record (EHR) services.

ATHN will use MRGE’s iConnect Network in its cloud-based platform that will help its clients have real time access to view exam results, diagnostic images and other critical information within the athenaClinicals EHR workflow. Following the announcement, athenahealth’s shares rose 1.0% yesterday.
The integration of iConnect Network into EHR workflow will improve communication between physicians and radiologists and reduce healthcare costs. It will also help healthcare providers to attest and receive incentives speedily and cost-effectively.

A few days back, athenahealth reaffirmed its revenues, margins and earnings guidance for 2013 and released its 2014 guidance where it anticipates higher revenues but lower earnings per share. For 2013, the company continues to expect revenues between $580 million and $615 million, adjusted gross margin between 63 and 64%, adjusted operating income between $68 and $80 million, and adjusted earnings per share between $1.05 and $1.15. The adjusted figures exclude non-recurring items and stock-based compensation.      

For 2014, ATHN expects revenues between $725 million and $755 million, adjusted gross margin between 62.5 and 63.5%, adjusted operating income between $70 and $80 million, and adjusted earnings per share between 98 cents and $1.10.

athenahealth reported adjusted earnings of $8.0 million or 21 cents per share (excluding amortization and integration and transaction costs) in the third quarter of the year, exceeding the Zacks Consensus Estimate of 15 cents per share. This translated into a 15.5% rise in net earnings from $7.0 million and 10.5% rise in earnings per share from 19 cents in the comparable quarter a year ago.

Revenues in the quarter surged 43.1% to $151.5 million but missed the Zacks Consensus Estimate of $155 million. Excluding Epocrates and other revenues (consisting of third-party tenant revenues) totaling $17.2 million, core athenahealth revenues rose 27% to $134.3 million. Growth was led by expanded clientele for the company’s offerings since the acquisition of Healthcare Data Services and strong athenaCoordinator business.

Currently, ATHN carries a Zacks Rank #3 (Hold). While we prefer none of the stocks from the medical information systems industry at this moment, we can consider some better-ranked stocks from the medical products industry such as Bio-Rad Laboratories, Inc. (BIO - Snapshot Report) and NuVasive, Inc. (NUVA - Snapshot Report). Both of them carry a Zacks Rank #1 (Strong Buy).

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