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athenahealth (ATHN) Q2 Earnings: What's in the Cards?

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athenahealth Inc. is set to report second-quarter 2016 earning results on Jul 21. Last quarter, the company posted earnings of 11 cents per share, which comfortably beat the Zacks Consensus Estimate of break-even.

We note that in the last four quarters athenahealth has surpassed the Zacks Consensus Estimate by an average of 315.63%.

Let’s see how things are shaping up for this quarter.

Factors at Play

We believe a strong product portfolio and expanding physician base will continue to drive athenahealth’s top line growth.
 

ATHENAHEALTH IN Price and EPS Surprise

ATHENAHEALTH IN Price and EPS Surprise | ATHENAHEALTH IN Quote

In the first quarter, compared to year-ago quarter, athenahealth added 1,816 physicians – up from 1,639 physicians – to athenaCollector; 1,302 physicians – up from 985 physicians – to athenaClinicals; and 1,643 physicians – up from 1,415 physicians – to athenaCommunicator.

However, lack of enterprise-sized deals, winding up of government funded stimulus and increasing competition in the HCIT market are major headwinds.

Earnings Whispers

Our proven model does not conclusively show that athenahealth is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: athenahealth currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 16 cents.

Zacks Rank: athenahealth has a Zacks Rank #3 (Hold) which increases the possibility of an earnings beat. However, when combined with a 0.00% ESP, it makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is anticipating negative estimate revisions.

Stocks to Consider

Here are a few stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Innoviva Inc (INVA - Free Report) , Earnings ESP of +25% and a Zacks Rank #1.

CytRx Corporation , Earnings ESP of + 15% and a Zacks Rank #1.

WellCare Health Plans , Earnings ESP of +1.45% and a Zacks Rank #1.

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